81536 v2
Development of Local Supply Chain:
The Missing Link for Concentrated
Solar Power Projects in India
ESMAP MISSION
The Energy Sector Management Assistance Program (ESMAP) is a
global knowledge and technical assistance program administered by
the World Bank. It provides analytical and advisory services to low-and
middle-income countries to increase their know-how and institutional
capacity to achieve environmentally sustainable energy solutions for poverty
reduction and economic growth. ESMAP is funded by Australia, Austria,
Denmark, Finland, France, Germany, Iceland, Lithuania, the Netherlands,
Norway, Sweden, and the United Kingdom, as well as the World Bank.
Development of Local Supply Chain:
The Missing Link for Concentrated
Solar Power Projects in India
ii Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Contents
Acknowledgments ix
Acronyms and Abbreviations x
Executive Summary 1
Part I: Assessment of CSP Project Prices and Costs in India 8
Chapter 1: Introduction 9
Chapter 2: Assessment of Cost Reduction for CSP Projects under JNNSM 12
2.1 Estimation of LCOE Based on Bid Analysis 14
2.2 CSP Plant Cost Estimates in India 15
2.3 Reasons for Higher Capex of International CSP Projects 16
2.4 LCOE Evolution Comparison 16
2.5 Future CSP Cost Reduction Possibility 16
Part II: Competitive Positioning of Local Manufacturing in CSP Technologies 18
Chapter 3: Present Scenario of CSP Local Manufacturing in India 19
3.1 CSP Value Chain 19
3.2 SWOT Analysis of CSP Component Manufacturing Industry 21
3.3 Participation of Related Existing Local Industries in
Supplying CSP Components and Systems 22
iii Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Chapter 4: Analysis of Manufacturing Capabilities of Specific Components 24
4.1 Mirror Manufacturing Industry 24
4.2 Fabrication Industry for Support Structures 27
4.3 Receiver Tubes Manufacturing Industry 28
4.4 Tracking and Drive Mechanism Industry 30
4.5 HTF (Synthetic Oil) Industry 31
4.6 Turbine Manufacturing Industry 33
4.7 Solar Steam Generator Manufacturing Industry 35
4.8 HTF Pumps Manufacturing Industry 36
Chapter 5: Summary of CSP Local Manufacturing Potential and
Cost Reduction 39
5.1 Local Manufacturing Capability Assessment and
Export Potential 39
5.2 Timeline for Indigenization 40
5.3 Minimum Demand Requirements 41
5.4 Expected Cost Reduction 41
5.5 Potential Involvement with International Players 42
Chapter 6: Analysis of Potential Economic Benefits from the
Development of a Local Manufacturing Base 45
6.1 Description of Economic Model 46
6.2 Projected Share of Local Manufacturing 47
6.3 Direct and Indirect Economic Impact 48
6.4 Labor Impact in Terms of Job Creation 48
6.5 Impact of Foreign Trade 49
Part III: Preparation of an Action Plan to Stimulate Local CSP
Technologies in India 50
Chapter 7: Present Scenario and Future Needs 51
7.1 Current Situation 52
7.2 Need to Support CSP Projects 52
Chapter 8: Action Plan 53
8.1 Long-Term Policy Framework from the Government 55
8.2 Availability of Low-cost Financing 56
8.3 Financial Planning of Subsidies and Incentives 56
8.4 Mechanism for Promotion of R&D and Innovation 60
Chapter 9: Roadmap for Specific Industries 63
9.1 Mirror Manufacturers 64
9.2 Receiver Tube PTC Manufacturers 65
9.3 Tracking and Drive Mechanism (TADM) Manufacturers 66
9.4 HTF Manufacturers 67
Chapter 10: Conclusions 68
iv Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Part IV: Appendixes 71
Appendix 1: CSP Technologies 72
Appendix 2: Commercial Projects and Pipeline Worldwide 81
Appendix 3: Overview of Cost Drivers in Reference Global CSP Plants 82
Appendix 4: JNNSM and Regulatory Mechanism 88
Appendix 5: Solar Hybrid Systems 92
Appendix 6: Cost Analysis Approach 99
Appendix 7: Cost Evolution for various CSP Technologies 104
Appendix 8: Approach to Data Research and Modeling 127
Bibliography 140
Boxes
Box 1: Examples of Incentives for Local Manufacturing of CSP Components 43
Box 2: Expectations from the Government 62
Figures
Figure 1: Comparison of Different Energy Sources Worldwide 10
Figure 2: Solar Resources for CSP Technologies 10
Figure 3: Illustration of CSP Stakeholders in India 19
Figure 4: Production and Consumption of CSP Electricity by 2050 22
Figure 5: Minimum Demand Requirements 41
Figure 6: Cost Reduction Potential Due to Local Manufacturing for
Components Considered for 100 MW PTC Plant without Thermal Storage 42
Figure 7: Share of Local Manufacturing in PT Technology 47
Figure 8: Share of Local Manufacturing in CR Technology 48
Figure 9: Roadmap for Mirror Manufacturers 64
Figure 10: Roadmap for Receiver Tube PTC Manufacturers 65
Figure 11: Roadmap for TADM Manufacturers 66
Figure 12: Roadmap for HTF Manufacturers 67
Figure 13: Views of Linear Fresnel Reflector Arrays 73
Figure 14: Basic Scheme of a PT Power Plant 74
Figure 15: Aerial View of Andasol Power Station 75
Figure 16: Scheme of a Molten Salt Power Tower 76
Figure 17: SES SunCatcher Dish Stirling Design 78
Figure 18: Overall Investment Cost Breakdown for Linear Fresnel Reflector
Reference Power Plant 83
Figure 19: Overall Investment Cost Breakdown for Parabolic Trough Reference
Power Plant, with Storage (left) and without Storage (right) 84
Figure 20: Overall Investment Cost Breakdown for Power Tower Reference
Power Plant,with Storage (left) and without Storage (right) 84
Figure 21: Overall Investment Cost Breakdown for Dish Stirling Reference Power Plant 85
Figure 22: Solar Irradiation Map of India Adapted from IMD 88
Figure 23: Key Government Bodies Involved in Solar and RE Development in India 91
Figure 24: Saturated-Steam Hybrid Plant Configuration 92
v Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Figure 25: Basic Scheme of an ISCCS 93
Figure 26: Expected Evolution of Installed Capacity Worldwide for Four CSP
Technologies, 2010–20 102
Figure 27: Cost Breakdown Diagram for Solar Collection System of LF Power Plant 105
Figure 28: Cost Breakdown Diagram for Thermal Conversion System of LF Reflector
Power Plant 106
Figure 29: Cost Breakdown Diagram for Electrical Conversion System of LF Reflector
Power Plant 107
Figure 30: Overall Investment Cost Evolution of the LF Reflector Power Plant 108
Figure 31: Cost Breakdown for the Solar Collection System of the Reference
PT Power Plant 111
Figure 32: Cost Breakdown for the Thermal Conversion System of the Reference
Power Plant 112
Figure 33: Cost Breakdown for the Thermal Storage System for
the Reference Power Plant 113
Figure 34: Cost Breakdown for the Electrical Conversion System for
the Reference Power Plant 113
Figure 35: Overall Investment Cost Evolution for the Parabolic Trough Technology 114
Figure 36: Cost Breakdown for the Solar Collection System of the Reference
Power Tower Plant 119
Figure 37: Cost Breakdown for the Thermal Conversion System of the Reference
Power Tower Plant 120
Figure 38: Cost Breakdown for the Thermal Storage System of the Reference
Power Tower Plant 120
Figure 39: Cost Breakdown for the Electrical Conversion System of the Reference
Power Tower Plant 121
Figure 40: Overall Investment Cost Evolution for the Power Tower Technology 122
Figure 41: Cost Breakdown for the Solar Collection System of the Dish Stirling
Reference Power Plant 124
Figure 42: Cost Breakdown for the Thermal and Electrical Conversion Systems of
the Dish Stirling Reference Power Plant 125
Figure 43: Overall Investment Cost Evolution of the Dish Stirling Technology 125
Figure 44: Pipeline of the Different Technologies until 2025 132
Figure 45: Investment Costs Breakdown by Subsystem for PT and
CR Power Plants in Terms of Percentage 134
Tables
Table 1: Main Characteristics of the Four Main CSP Technologies 11
Table 2: Bidders and Discounts Offered for a CSP Project in NSM Phase I 13
Table 3: Cost Breakup of a Reference 50 MW CSP Parabolic Trough Plant 15
Table 4: Industry Groups and Other Organizations Identified as Key Stakeholders 20
Table 5: Vendors for Solar Field Components Currently Identified in India 20
Table 6: Vendors for Power Block Components and Concept Engineering/EPC
Currently Identified in India 21
Table 7: SWOT Analysis for Local Manufacturing for CSP Components 21
Table 8: Traditional Industries Potentially Involved in CSP Industry and the
Components They Could Manufacture 23
vi Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 9: Major Manufacturers of Mirrors in India 25
Table 10: Gaps in Local Manufacturing 25
Table 11: Minimum Investment Required for CSP Parabolic Mirror Manufacturing 26
Table 12: SWOT Analysis for Local Manufacturing of Mirrors 26
Table 13: SWOT Analysis for Local Manufacturing of Support Structures 28
Table 14: Gaps in Local Manufacturing 29
Table 15: SWOT Analysis for Local Manufacturing of Receiver Tubes 29
Table 16: Indian Manufacturing for Parabolic Trough, Current Status and Future
Scenario (assuming at least 500 MW/year of CSP installation in India) 30
Table 17: Gaps in Local Manufacturing 30
Table 18: SWOT Analysis for Tracking Device Manufacturing in India 31
Table 19: Gaps in Local Manufacturing 32
Table 20: SWOT Analysis for Local HTF Manufacturing 32
Table 21: Major Manufacturers of Turbines in India 33
Table 22: Gaps in Local Manufacturing 34
Table 23: SWOT Analysis for Local Manufacturing of Turbines 34
Table 24: Potential Lead Players in Solar Steam Generator Manufacturing 35
Table 25: SWOT Analysis for Solar Steam Generator Manufacturing in India 36
Table 26: Players in HTF Pump Manufacturing in India 37
Table 27: SWOT Analysis for Local Manufacturing for HTF Pump 38
Table 28: Preliminary Local Manufacturing Capability and Export Potential to MENA 39
Table 29: Timeline for Indigenization 40
Table 30: Assessment of Cost Reductions Due to Local Design and Production 41
Table 31: Successful Incentives for Local Manufacturing of CSP Components in Spain,
Germany, and the United States 44
Table 32: Considered Scenarios for Installed Capacity in India and Export Market 46
Table 33: Estimated Direct and Indirect Economic Impact in Rs Crores per Year for
Scenarios A, B, and C 48
Table 34: Jobs Created for Each of the Scenarios A, B, and C in India 49
Table 35: Key Responsibilities and Timelines for the Action Plan 54
Table 36: Action Plan on Low-cost Financing 57
Table 37: Action Plan on Financial Planning of Subsidies and Incentives 58
Table 38: Action Plan for Promotion of R&D and Innovation 60
Table 39: Industry-Specific Actions to Promote CSP Technologies 63
Table 40: Linear Fresnel Reflector Value Chain 73
Table 41: Parabolic Trough Plant Value Chain, Playerswith a Track Record of
Built Projects 75
Table 42: Parabolic Trough Components Value Chain 76
Table 43: Power Tower Plant Value Chain 77
Table 44: Power Tower Components Value Chain 77
Table 45: Dish Engine Solar Plant Value Chain 79
Table 46: Dish Engine Solar Components Value Chain 79
Table 47: Power Island Components Value Chain 79
Table 48: Components Value Chain for Thermal Energy Storage 80
Table 49: Total Installed Capacity and Project Pipeline Worldwide 81
Table 50: JNNSM Targets 89
Table 51: Main Characteristics for the Parabolic Trough Field Implemented in
a Hybrid Plant 95
vii Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 52: Main Characteristics and Simulation Results for the Case 1 95
Table 53: Main Characteristics and Simulation Results for the Case 2 96
Table 54: Main Characteristics and Simulation Results for the Case 3 96
Table 55: Financial Calculations for a CSP-Biomass Hybrid Plant 97
Table 56: Overall Estimate of the Uncertainty Associated to the
Costs Data by Technology 100
Table 57: Investment Costs for the 30 MW LF Plant without Thermal Storage 104
Table 58: Summary Table of the Main Factors Considered for the Estimation of
the Cost Evolution for Linear Fresnel Reflector Technology 108
Table 59: Investment Costs for the 50 MW PT Plant with 6 Hours Thermal Storage 109
Table 60: Investment Costs for the 50 MW PT Plant without Thermal Storage 110
Table 61: Summary Table of the Main Factors Considered for the Estimation of
the Cost Evolution for PT Technology 114
Table 62: Investment Costs for the 17 MW CR Plant with 15 Hours Thermal Storage 117
Table 63: Investment Costs for the 17 MW CR Plant without Thermal Storage 118
Table 64: Summary Table of the Main Factors Considered for the Estimation of
the Cost Evolution for CR Technology 122
Table 65: Investment Costs for the 10 MW PD Plant without Thermal Storage 123
Table 66: Summary Table of the Main Factors Considered for the Estimation of
the Cost Evolution for PD Technology 126
Table 67: External and Internal Factors Considered at the Questionnaire 128
Table 68: Number of Value Chain Players Involved in the Primary Research 128
Table 69: List of Companies Interviewed 131
Table 70: Phase-Wise Capacity Additions for CSP Technologies in India,
Optimistic Scenario 132
Table 71: Capacity Addition per Year over the Three Phases of JNNSM 133
Table 72: Scenarios Considered for the Analysis 133
Table 73: Tabulated Results of the Questions Asked to Component Manufacturers 135
Table 74: Expected Percent Cost Reduction in Phase II and Phase III 135
Table 75: Cost in Rs Crores per MW in Each Phase of JNNSM 136
Table 76: Market Size in Rs Crores per Year in Each Phase of JNNSM 136
Table 77: Expected Indigenization of Components (Percentage) for
Different Scenarios 137
Table 78: Direct and Indirect Economic Impact 138
Table 79: Job Creation per Year for Construction, O&M,
and Local Manufacturing for the Three Possible Scenarios 139
viii Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Acknowledgments
This study was prepared by a World Bank team led by Nataliya Kulichenko (Africa Sustainable
Development Energy –AFTG1) and Ashish Khanna (South Asia Sustainable Development
Energy–SASDE). The World Bank project team consisted of Chandrasekeren Subramaniam
(SASDE), Mani Khurana (SASDE), Kanv Garg (SASDE), and Ruchi Soni (Sustainable
Energy Unit–SEGEN).
The team is also grateful to the peer reviewers – Chandrasekar Govindarajalu (International
Finance Corporation, South Asia) and Roger Coma Cunill (Middle East and North Africa
Regional Strategy & Programs - MNARS) – for their insightful inputs. We especially wish
to thank Jyoti Shukla (Sector Manager—SASDE) for her constructive guidance and valuable
support during the delivery of the report.
The desk study inputs for the study were provided by a consortium of consultants including
Ynfiniti Engineering Service, Nixus, Aqua MCG, and National Renewable Energy Centre
(CENER). They also interacted with CSP developers and other industry stakeholders to
share data and first-hand experiences.
In addition, the team would like to thank the counterparts in the Ministry of New and
Renewable Energy (MNRE) – Mr. G.B. Pradhan, Mr. Tarun Kapoor, and Dr. Ashvini Kumar
– who provided guidance and technical inputs through the assignment.
This team is grateful for the funding received from Energy Sector Management Assistance
Program (ESMAP) for the study.
ix Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Acronyms and Abbreviations
ADB Asian Development Bank
BOP Balance of plant
capex Capital expenditure
CCD Concessional customs duty
CDTI Spanish Centre for Industrial Technological Development
CEA Central Electricity Authority
CENER Centro Nacional de Energías Renovables (National Renewable Energy
Centre)
CERC Central Electricity Regulatory Commission
CII Confederation of Indian Industry
CR Central receiver
CRS Central receiver system
CSP Concentrating solar power
CTA Corporación Tecnológica de Andalucía
CUF Capacity Utilization Factor
DNI Direct normal irradiance
DSG Direct steam generation
EEA Egyptian Electric Authority
EPC Engineering, procurement, and construction
EPCM Engineering, procurement, construction management
ERM ERM Power
EUR Euro
FDI Foreign direct investment
x Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
FIT Feed-in tariff
GBI Generation Based Incentive
GDP Gross domestic product
GW Gigawatt
HCE Heat Collector Element
HTF Heat Transfer Fluid
IBRD International Bank for Reconstruction and Development
ISCCS Integrated Solar Combined Cycle System
IDA International Development Association (World Bank)
IDFC Infrastructure Development Finance Company
IEA International Energy Agency
IFCs Infrastructure finance company
IMD India Meteorological Department
INR Indian Rupee
IP Intellectual Property
IREDA Indian Renewable Energy Development Agency
ISO International Organization for Standardization
ITC Investment Tax Credit
ITT International Telephone & Telegraph
JNNSM Jawaharlal Nehru National Solar Mission (National Solar Mission)
JV Joint venture
kWh Kilowatt-hour
LCOE Levelized cost of energy
LF Linear Fresnel
LFR Linear Fresnel reflector
LIC Life Insurance Corporation of India
L&T–MHI Larsen & Toubro Limited Company
m Meter
m2 Square meter
MEIL Megha Engineering and Infrastructures Limited
MENA Middle East and North Africa
MNRE Ministry of New and Renewable Energy
MOF Ministry of Finance
MOP Ministry of Power
MOU Memorandum of Understanding
Mton Million tons
MW Megawatt
NAL National Aerospace Laboratories
NAPCC National Action Plan on Climate Change
NREA New and Renewable Energy Authority (Egypt)
NTPC National Thermal Power Corporation
NVVN Vidyut Vyapar Nigam Ltd
O&M Operations and maintenance
pa Per annum
xi Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
PD Parabolic dish
PFC Power Finance Corporation Limited
PG Power generation
PPA Power purchase agreement
PPP Public-private partnership
PT Parabolic trough
PTC Parabolic trough collector
PTD Power transmission and distribution
PTR Power tower receiver
PV Photovoltaic(s)
RBI Reserve Bank of India
REC Renewable energy certificate
RM Raw material
ROE Return on Equity
RPO Renewable Purchase Obligation
Rs Indian rupee
SEC Securities and Exchange Commission
SES Stirling Energy Systems
SESI Solar Energy Society of India
SEEZ Solar energy enterprise zone
SIDBI Small Industries Development Bank of India
SMAG Solar Millennium AG
SSG Solar steam generator
SWOT Strengths, weaknesses, opportunities, and threats
TADM Tracking and drive mechanism
TERI The Energy and Resources Institute
TES Thermal energy storage
UPES University of Petroleum and Energy Studies
US$ U.S. Dollar
USDOE US Department of Energy
WACC Weighted average cost of capital
xii Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Executive Summary
The specific objective of the study is to assess the potential of India’s industries to set up
a manufacturing base for production of Concentrating Solar Power (CSP) technology
components and equipment. The study assesses competitive positioning and potential of
Indian companies in the manufacturing of key CSP components. It proposes an action plan
to help develop this potential and evaluate the resulting economic benefits. This report
includes the following activities:
g Assessment of the competitive position of industries in India to support the development
of CSP technologies
g Evaluation of short-, medium-, and long-term economic benefits of the creation of a
local manufacturing base
g Action plan to stimulate local manufacturing of CSP technology components and equipment
Need to Support CSP Projects
Amidst the success of solar PV projects in India, the CSP technology also provides a compelling
case for support by the government because of the following technological reasons:
g Among Solar CSP is the only techno-economically viable option at present which has a
storage option that can enable solar energy to become dispatchable, dependable, which
can meet both the peak base load.
g The conversion of solar to steam is a relatively high-efficiency process (vs. the conversion
efficiency of PV), and this can effectively supplement the fossil fuels/renewable fuel, such
as biomass, thus contributing to overall energy security of the country.
1 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Competitive Position of Industries in India to Support the Development of
CSP Technologies
The two drivers considered in the cost evolution model are experience and technology
breakthroughs. In addition, for each of these technologies, the main actors of the plants’ and
components’ value chain have been identified in this report. In the medium term, India is
expected to become a major CSP player worldwide. India's Jawaharlal Nehru National Solar
Mission (JNNSM) includes measures for rapidly expanding the use of photovoltaic and solar
thermal systems, in order to drive down costs and encourage domestic solar manufacturing.
The plan also proposes scaling up centralized solar thermal power generation with the aim
of achieving cost parity with conventional grid power by 2020 and the full necessary energy
infrastructure by 2050. With the objective of 20 GW of solar power by 2022, and a first step
of 1.3 GW of solar power by 2013, this is the most ambitious solar plan that any country has
laid out so far.
For the solar plan to succeed, existing Indian industries have to identify the opportunities
and react proactively to participate significantly in supplying CSP components and systems.
Many traditional industries that could take an active part in CSP technology development
are automotive, glass, metal, power and process heat, machine tools and robotics, technical
supervising, electronics industry, oil and gas, and chemical industries. Many of them only
need a modest effort to adapt their manufacturing processes to the demands of the CSP
industry. Nonetheless the competition between CSP players will increase in future, enlarging
the need for R&D activities to develop cheaper and more efficient components. That is why
collaborative research between private companies and research laboratories is important to
develop the components and systems that will help in reducing the cost of CSP technologies.
To perform an assessment of the competitive position of industries in India to support the
development of CSP technologies, a detailed analysis of the local industrial capabilities
was carried out for different key components of CSP, which included an assessment of the
requirements of components, current industrial capacity in India, expected impacts on cost
reduction as a result of local manufacturing, relative market growth, and market dynamics. A
strengths, weaknesses, opportunities, and threats (SWOT) analysis for local manufacturing
was also performed. A proposed timeline for indigenization of each key component was also
developed as shown on page no. 3.
Under JNNSM Phase 1, a significant reduction of tariffs has been achieved because of the
implementation of a reversed auction bidding mechanism, combined with the approach
taken by the solar project developers which is a combination of both locally manufactured
and imported components. For example, the developers went in for domestic structural,
civil, and mechanical items, while limiting the imports to key components, such as
mirrors, receiver tubes, heat transfer fluid (HTF), solar steam and turbine generators. In
future further cost reductions could be expected from local manufacturing of tracking
devices, receiver tubes, parabolic mirrors, turbines, and structures (parabolic trough, PT).
Local manufacturing has additional benefits like -developing indigenous operations and
maintenance (O&M) industry supported by local subcontractors, better procurement lead
time, and trained local manpower. This study, indicates that local manufacturing and local
IP, could reduce the costs of mirrors, receiver tubes and structures for PT collectors up to 28
percent, 30 percent, and 40 percent, respectively. The potential involvement of international
players in local manufacturing activities in India has been also considered.
2 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
COMPONENTS PHASE I PHASE II PHASE III
(1 to 3 years) (4 to 7 years) (8 to 12 years)
SOLAR FIELD Conclusion:
Site Development Solar Field:
g Mirrors: Partial
Foundations & Pylons Manufacturing
Mirrors PT and PD* is possible in
Mirrors CR and LF* phase I with full
indigenization in
Frame and Support Structure phase II
Receiver tubes PT and LF
g Receiver Tubes,
Receivers for CR and PD
HTF, Drive &
HTF Synthetic Oil Track Mechanism:
Drive and Track PT and LF Indigenization is
estimated by phase
Drive and Track CR and PD
III
POWER BLOCK Power Block:
g Turbines:
Solar Steam Generator Indigenization
Turbine may happen in
Cooling System phase I itself, but
is expected to get
BOP stabilized by phase
II
Local Import
*The technology for mirror manufacturing would be available at these phases provided that low iron
sand is available in India. Otherwise low iron sand would have to be imported.
Short-, Medium-, and Long-Term Economic Benefits of the Creation of
a Local Manufacturing Base
It has been seen that with appropriate incentives, some countries have reached a very high rate
of local manufacturing for CSP components. For example, the Spanish Association of the Solar
Thermal Electricity Industry claims that between 75 percent and 80 percent of the components
used in the Spanish CSP plants come from national manufacturing or are developed with
national technology. To reach this high level of domestic production, the Spanish industry
benefited from incentives enabling the development of manufacturing plants, combined with
other mechanisms focusing on job creation and promoting the development of innovative
companies. Successful examples of CSP manufacturing plants that have also been built in
Germany, Spain, and the United States which are reported in this document.
Local economic benefits resulting from industry development in India have been
analysed using a dynamic economic model with market scenarios and reference plants
with assumptions regarding the local share of a CSP deployment and manufacturing of
components. The results are aggregated by average share of local manufacturing in India,
economic impact on GDP, labour impact (that is, job creation), and foreign trade impact.
The projections indicate that the potential cost reductions in solar field components are
large, which would be led by the savings resulting from local manufacturing, lower customs
duties for equipment and raw or processed material, and the lower cost of logistics and
3 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
labour. For other components, cost reductions could materialize because the increase in
market size and the passage of time in years would result in economies of scale. In cases
where the critical minimum market size is not reached, cost reductions resulting from
local manufacturing have been suitably scaled down. A total reduction of approximately
10 percent has been projected for components taking into account the learning curves by
2022 if volume growth is ensured (Optimistic Scenario). This has been reduced to 3 percent
in the other extreme where the volume growth is small (Pessimistic Scenario). A moderate
scenario has also been projected.
Effects on direct and indirect economic values are calculated in absolute numbers for each
scenario. In addition to local manufacturing of components and construction of the plant,
it is also assumed that EPC and O&M will contribute to the economic impact of CSP plants.
The economic impact is strongly related to the market demand for CSP technologies. The
main results of this study are presented below.
Scenario Installed Local Share in Cost Created Jobs
Capacity Manufacturing Reduction
Scenario A 2,000 MW 76% 13% 19,000
(pessimistic)
Scenario B 6,000 MW 83% 16% 58,000
(moderate)
Scenario C 10,000 MW 90% 20% 96,000
(optimistic)
Foreign trade, in terms of generated exports, is estimated only for CSP solar field and thermal
conversion specific components. It is assumed that there will be no additional exports for
conventional elements, such as power blocks and electrical conversion blocks resulting
from the projected growth of the solar thermal industry. Consideration has also been given
to the expected learning curve and the lead time for stabilization that will be required for
the manufacturing of components in India. Minimum market demand for manufacturing
also plays an important role because this factor will be decisive for determining proper
timing to start production in India. For this reason, in scenarios A and B, exports are not
considered because with two technologies competing for the market—parabolic trough
and central receiver—the demand will be just adequate to justify full-fledged production
of some components for each technology, but not sufficient to start exports. In this report,
exports have been considered mainly for the currently commercially mature PT technology.
Assuming growth in exports from 400 MW per year in 2022 to 900 MW per year in 2030,
the export market is estimated to be about Rs. 5,000 crores in 2022, Rs. 8,000 crores in 2025,
and Rs. 11,500 crores in 2030, respectively.
Action Plan to Stimulate Local Manufacturing of CSP Components and Equipment
As part of the study, the two workshops were conducted that brought together representatives
from industry and government, and the industry expectations to jump-start market
development of CSP projects and plant components were discussed. These discussions
are reflected in the report. To address the industry expectations, the report suggests a
comprehensive action plan as shown on page no. 5.
4 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Section Action Plan Supportive Y1 Y2 Y3 Y4 Y5
Responsibility
Long term Year-wise allocation for CSP MNRE
policy power projects
framework Regulatory support & tariff MNRE & CERC
for CSP mechanism for solar thermal
development hybrid projects
Renewable Energy Certificate CERC
mechanism for Solar Thermal
energy generation
Planning Adequate payment security MOF/MNRE
for payment mechanism (using the Coal cess
security Funds).
Low cost Enablement of low cost MOF
financing financing for CSP from banks &
separate exposure limits for CSP
projects.
Financial Time-bound and milestone- MOF
planning of based CCD and zero
subsidies and excise duties for materials
incentives and components used for
manufacturing of solar systems
and development of projects
Fiscal incentives for sponsored MOF
research and in house R&D
expenditure
Mechanism Development and maintenance MNRE
for promotion of a public repository of
of R&D and knowledge
innovation Development of quality and MNRE
specification standards
Establishment of a R&D MNRE
framework on a PPP basis
Development of solar energy MNRE
courses
Sponsored research projects in MNRE
educational institutions
The responsibilities are assigned within the current operating institutional framework of
the central and state governments. The second and third phases of the JNNSM should
provide clarity in the allocation of capacity for solar thermal technologies versus other solar
technologies for the next 10 years.
To offset the high capital costs representing a large fraction of the levelized cost of energy (LCOE)
in CSP plants, the government should focus its effort on establishing an adequate payment
security mechanism coupled with low-cost financing for CSP. From the technology perspective,
hybrid technologies – Biomass / coal including generation of pure steam and HVAC need to
be made eligible to receive government incentives (in proportion to their solar components),
5 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
along with those facilities that employ only solar technical options. Accelerated depreciation
benefits and/or investment tax credit policy needs to be sustained for the long term. This also
has to be accompanied by tax holidays and zero excise duties for components produced locally.
For those components that are currently available in the Indian market, market growth should
be promoted in order to reduce costs.
Component or Present Local Recommended Actions
Material Manufacturing
Capability
RECEIVER (PT) low g Promote R&D for metal glass seal, and solar
selective and anti-reflective coatings
g Promote collaboration with global players
RECEIVER (CR) low g Promote R&D for receivers able to work
under high solar flux, for volumetric receivers
using atmospheric air as HTF, and for durable
pressurized air receivers
MIRROR (PT) medium g Explore sources of low iron sand
g Lower customs for bending equipment and low
iron sand
MIRROR (CR) medium/high g Zero customs for low iron sand
g Explore sources of low iron sand
DRIVE/TRACKING (PT) medium g Promote R&D for solar sensor and controller
technology
g Promote collaboration with global players
DRIVE/TRACKING (CR) low g Promote R&D for solar sensor and controller
technology
g Promote collaboration with global players
HTF (Synthetic Oil) and medium g Ores not present in India. Lower customs for oil
MOLTEN SALTS) and salts.
g Promote R&D in materials having high heat
density, stability, thermal conductivity, and latent
heat
g Promote R&D in thermochemical and
electrochemical storage
TURBINES medium/high g Establish technical and quality standards for
CSP turbines
Concluding Remarks
The JNNSM Phase I catalysed the growth of the solar sector in the country, with more than
1 GW of solar capacity being installed by October 2012, and contributed to the reduction
of tariffs offered by project developers. To keep this momentum and to achieve further cost
reductions for CSP technologies, the government needs to provide clarity regarding the
capacity allocation for CSP sector, so that the industry is clear about the market size of CSP
in the next 10 years.
In the long term, with reduction in the solar field costs, CSP will become more and more cost
effective, specifically within the intermediate and base-load market segments because of the
integrated storage options. CSP is the only solar technology presently that can incorporate
6 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
thermal storage solution, making CSP solar power dispatchable and thus more cost effective
to meet all segments of power demand.
In the long term, with reduction in the solar field costs, CSP will become more and more cost
effective, specifically within the intermediate and base-load market segments because of the
integrated storage options. CSP is the only solar technology presently that can incorporate
thermal storage solution, making CSP solar power dispatchable and thus more cost effective
to meet all segments of power demand.
Realistic potential exists for solar thermal technologies to make an important contribution in
meeting India’s energy demand and diversifying the country’s power generation profile. Global
trends and actual price discovery indicate that the LCOE from renewable options will continue
to go down, while the cost of fossil fuels will continue to rise and the demands for energy
independence and the growing awareness of the real social and environmental costs of energy
generation will ensure that this potential is realized.
Potential also exists for the subcomponents of solar thermal systems to be manufactured in
India in the short, medium, and long terms. India has inherent competitive advantages that
will facilitate the transition to becoming a major provider of solar thermal technologies. The
factors that could contribute to this include highly trained engineering staff, low labour costs,
and an emerging domestic market. These are some of the aspects that can be leveraged by the
Indian industry to lower the capital costs for CSP plants, thereby decreasing the LCOE and
driving the market penetration of solar technologies.
Government, developers, and industry need to work together to ensure a viable path for
solar thermal technology development by
g creating a financial and regulatory environment that supports -- investment in R&D,
g establishment of financial and political incentives for sustainable development,
g lowering the effective financial risks for investors, while factoring in the positive impacts
on the environment, improvements in health, the natural habitat, and the quality of life
that are associated with renewable energy in general and solar thermal technologies in
particular.
7 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Part I
Assessment of
CSP Project Prices and Costs in India
8 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
1. Introduction
In the following section, the four main Concentrated Solar Power (CSP)1 technologies are
presented, giving an insight into the value chain of systems and components, and into the
commercial projects and pipeline.
The solar spectrum may be roughly approximated by the spectrum of a blackbody at
approximately 5,778 K, which means that solar energy has a very high exergy. The solar flux
density at the earth’s mean distance (or “solar constant”) is about 1,366 kW/m2. Some of this
is scattered and absorbed as it passes through the atmosphere, so only around 1 kW/m2 is
incident on the surface of the earth at noon on a cloudless day. This means that the solar
radiation by itself would only heat a thermal fluid to a relatively low temperature; to achieve
higher solar fluxes and higher temperatures, sunlight must be concentrated.
Figure 1 shows the high potential of the solar energy in comparison with other energy
sources. Solar radiation received in the whole terrestrial surface in one year is represented
in this figure, together with all the known fossil fuel reserves, including uranium. Annual
energy consumption is also depicted in Figure 1.
This huge potential is distributed over the earth, having different incidence in specific
locations, depending on the latitude and average cloudiness, for example. These values can
vary from 675 kWh/m2/year in the Arctic islands to 2,400 kWh/m2/year in some locations
such as the Sahara.
Solar energy thus has two main characteristics: it is highly diluted and highly variable.
1
In this report, CSP stands for Concentrating Solar Thermal Power and focuses only on the power generation aspect of solar
power. The report discusses only a group of CSP technologies and excludes concentrating PV.
9 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India 9
Figure 1:
Comparison of Different Energy Sources Worldwide
Source: CENER
Figure 2:
Solar Resources for CSP Technologies
(DNI in kWh/m2/day)
Source: World Bank (2006)
10 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
The benefits of solar power are compelling: environmental protection, economic growth, job
creation, energy security, and rapid deployment, as well as the global potential for technology
transfer and innovation. The underlying advantage of solar energy is that the fuel is free,
abundant, and inexhaustible. Solar conversion technologies can be applied properly in
regions with annual mean radiation values higher than 1,750 kWh/m2 per year. Solar thermal
power has an important advantage in comparison to other renewable energies technologies—
and that is its potential dispatchability. For many solar thermal technologies, it is possible to
include an effective thermal storage system or a hybrid scheme, with fossil fuels or biomass to
avoid interruptions during transient conditions or after sundown.
Hybrid systems allow for reduction of polluting and greenhouse gas emissions in comparison
to fossil plants, offset variations of the solar radiation by fossil fuel to avoid partial load
operation of the turbine, improve the integration to the grid, and increase the capacity factor
without incremental costs associated major additional investment costs. Solar thermal
technology takes advantage of incident solar radiation, concentrating and collecting it in a
specific system that heats a thermal fluid. This heat is then used to run a turbine or engine
and produce electricity. This process can be carried out directly or indirectly, through an
intermediate heat transfer fluid and the use of a heat exchanger.
As presented in Table 1, four CSP technologies are being currently developed and operated:
linear Fresnel reflector (LF), parabolic trough (PT), power tower system or central receiver
system (CRS), and parabolic dishengine (PD).
Table 1:
Main Characteristics of the Four Main CSP Technologies
Linear Concentration Systems Point Focus Concentration Systems
Linear Fresnel Power Tower Parabolic Dish Or
Parabolic Trough
Reflector System Engine (Stirling)
g LF reflector g PT systems concentrate g A Central Reciever g PD systems consist of
concentrating systems the solar radiation system uses mirrors a mirrored dish that
use flat or slightly with a parabola-shaped called heliostats with collect and concentrate
curved mirrors to focus mirror onto a linear two-axis sun-tracking to sunlight onto a receiver
solar radiation onto a receiver located at its focus concentrated solar mounted at the focal
linear receiver. focal length. radiation on a receiver point of the dish.
g The PT system is the at the top of a tower. g The receiver is
predominant linear g Two main technical integrated into a high-
system and is the designs can be efficiency engine (the
most developed and distinguished depending Stirling engine is the
commercially tested on the working fluid most common type of
CSP technology. used: water/steam and heat engine used).
molten salts.
A detailed description of commercially available CSP technologies and their plant and
components value chain is provided in Appendix 1.
11 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
2.
Assessment of Cost Reduction for
CSP Projects under JNNSM
In the following section, the cost evolution and bid price assessment for the four main CSP
technologies are presented in the context of the completed bidding for Phase-I of the JNNSM.
While Appendix 3 provides information on the cost evolution normally expected, the prices
of CSP projects in India, quoted by the bidders, have evolved in a unique manner, and a
reduction of about 37.5 percent over the reference project costs has-been seen in the very
first round of 470 MW projects under Batch I of Phase I of the JNNSM. The contracts were
awarded through a process of a reverse auction based on tariff-based competitive bidding.
Steep reductions were observed in the offered CSP prices facilitated through a wide array of
regulatory mechanisms, detailed in Appendix 4.
While the Central Electricity Regulatory Commission (CERC) had notified a benchmark
capital cost of Rs 15 crores/MW of installed capacity translating to a benchmark (feed-
in tariff) tariff of Rs 15.30/KWh, (based on petitions filed by project developers, public
consultations, comparative studies of international project costs, and adjusting these costs to
the local conditions where applicable). Because of an overwhelming response of solar project
developers, which would have resulted in capacity oversupply, the Government of India had to
resort to a competitive bidding process for the selection of project developers.
Sixty-five bidders were shortlisted, totaling an installed capacity of 2,811 MW. The Ministry
of New and Renewable Energy (MNRE) set a ceiling for submitting bids at the 470 MW,
planned for contract awards. Since the number of bidders far exceeded the project capacity
to be awarded, the selection of the bidders was carried out through a reverse auction process
wherein the bidders were asked to provide discounts against the CERC determined tariff of
Rs 15.30/KWh. In order to prevent adventurous bidding, the discounts to be offered were
linked to additional bank guarantees, depending on the quantum of the discounts offered.
12 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
The list of bidders and the discounts offered by the bidders are given in Table 2.
Table 2:
Bidders and Discounts Offered for a CSP Project in NSM Phase-I
Name of the Bidder Capacity Discount Name of the Bidder Capacity Discount
(MW) (P/KWh) (MW) (P/KWh)
LANCO 100 482 Askit Power 50 100
KVK Energy 100 411 Dot Servises Ltd 5 92
Megha Eng 50 400 VS lignite 50 82
Raj Sun-Tech 100 334 Hetthrow 50 82
Aurum Renewable 20 312 KG Solar 50 76
Godavari 50 311 Knowledge 10 74
Corp Ispat 50 307 Gamnmon Renewable 50 64
Indure 50 297 Airmid Power 100 50
Welspun Renewables 50 285 GRD 25 46
Chennai Radha 5 281 Shapoorji Pallonji 50 37
Sai Sudheer 20 276 East India 20 34
OM Metal 50 246 BG Power 50 32
Wadhwan Solar 50 242 Abengoa 50 31
Sravanthi 75 235 Sujana 10 31
Zamil Infra 100 234 Alstrom Capital Solar 5 16
Welspun 50 234 MAHA GENCO 50 1
Birla corp 10 230 Cethar Energy 10 0
GAIL 50 219 Surana Green 50 0
Goyal MG Gases 50 213 Intergra 30 0
Neel Metal 45 201 Skill Infrastructure 36 0
Coramondal 25 194 VA Friendship Solar 50 0
Abengoa 50 181 Era T&D 50 0
VA Friendship Solar 50 157 Birla Urja 10 0
Sujana 10 154 Madhav Power 5 0
Aravali 45 153 Alex Spectrum 25 0
Essar Power 100 153 ILFS 10 0
ACME 50 151 Surya Vidyut 10 0
Cargo 50 140 Hindustan Thermal 30 0
Stellar Energy 50 132 Green Energy Renewables 50 0
Askit Power 50 125 Stellar Energy 50 0
ACME 50 123 Surya Chakra 50 0
Sheshraj 10 120 Surya Chakra 5 0
Prithvi info 100 108 Elecor SA 100 0
Of the 65 shortlisted bidders, 16 did not offer any discount. Fourteen bidders offered
discounts ranging from Rs 1.00 to Rs 2.00/kWh. Thirteen bidders offered discounts from Rs
2.00/kWh to Rs 3.00/KWh and the 7 successful bidders offered discounts from Rs 3.07/KWh
13 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
to Rs 4.82/KWh. Seven companies, including Abhijeet, Lanco, and Reliance, were allocated
projects at a weighted average price of Rs. 11.48/ KWh.
The bids quoted by the developers are an indication that the bidders gave consideration
to the strategic importance of early entrance to the market and were able to leverage both
internal and external resources to competitively lower offer prices. By contrast, the CERC
prices might have also been on a higher side, since adjusting feed-in tariff close to real prices
requires regular adjustments based on the experiences of implemented projects in a given
country environment. As per the JNNSM timelines, the developers have to commission the
plants by May 2013. Even though all the projects have achieved financia clouser, it has been
reported that several projects are facing implementation challenges, ranging from financing,
inaccurate DNI data (leading to reengineering the solar collector sizing), supply chain, etc.
2.1 Estimation of LCOE Based on Bid Analysis
The major parameters that go into determination of a rate of cost recovery are as follows:
g Project cost
g Interest rates
g Return on equity (ROE)
g Net generation
g Debt-to-equity ratio
As per the CERC norms for these parameters, cost of electricity tariff for a project with the
investment cost of Rs. 15 crores/MW translates into Rs. 15.30/KWh. Considering the same
CERC assumptions, the project costs for a successful bidder would translate into Rs. 10 to
Rs. 12 crores/MW if the bidder accepts a lower ROE of 14 percent as against the CERC norm
of 19 percent. In addition, the developers may have factored in on balance sheet financing
a foreign loan or domestic loan at a lower interest rate, which would allow arriving at the
acceptable internal rate of return at a project cost assumed by CERC. Considering these and
other factors, it can be inferred that the developers would have estimated a project cost of
between Rs. 13 crores/MW and Rs. 14 crores/MW.
The CSP projects in India are currently in the execution phase, and most of the projects
have achieved financial closure and have commenced construction. There are reports that
several developers are experiencing delays in project construction due to lack of experience.
Further, the lack of availability of the HTF s also cited as one of the bottlenecks. Only upon
commissioning the projects and assessing the lessons learned, including the re-evaluation
of estimated costs, would it be possible to determine with a higher degree of accuracy
the reasons for considerably low project prices offered by the bidders. In this respect, it is
necessary to emphasize that the bid price of the project doesn’t necessarily represents its cost.
In markets, in which the developers are exploring the ways of early entrance, the prices can
be intentionally lowered to secure first contracts and gain the needed project development
and operational experience. It is quite plausible that some other factors contributed to lower
bidding prices, including but not limited to the following:
g The global recession leading to competition among the global suppliers for key solar
plant items resulting in an ability to negotiate a lower cost.
14 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
g Adopting an engineering, procurement, and construction (EPC) management route
rather than the full EPC procurement method.2 The latter assumes full functional and
performance guarantees, thus increasing the overall project cost. The downside of the EPC
management approach is the risk of not achieving the performance parameters provided
in the bid, as well as slipping on project schedule milestones and commissioning dates.
2.2 CSP Plant Cost Estimates in India
Based on the analysis of project prices offered by the bidders, a comparison between the
capital cost of the reference 50 MW CSP parabolic trough plant without storage and cost
estimates of a similar plant in the Indian market conditions plant is presented in Table 3.
Table 3:
Cost Breakup of a Reference 50 MW CSP Parabolic Trough Plant
CONCEPT COST COST Typical India Cost
(US$ M) (Rs. Crores) Estimates (Rs. crores)
Solar collection system 106.7 471.4 176.8
Mirrors 17.3 76.6 49
Support structures 34.7 153.1 49
Drive mechanisms 3.8 16.7 4.8
Land leveling 10.4 45.9 15
Foundations 17.3 76.6 24
Assembly 23.3 102.8 35
Thermal conversion system 43.3 191.5 130
Thermal oil 3.2 14 22.5
Receiver tubes 18.4 81.2 60
Ball joints 0.6 2.6 2
Piping, valves and spare parts 1.9 8.5 5
Oil forwarding skid (filters, piping, 12.4 55 35
pumps, tanks, assembly)
Oil purification system 0.5 2.4 1
Fire protection system 1.6 7.2 2
Inertization system 0.8 3.7 2.5
Natural Gas Boilers 3.8 16.7 0
Electrical conversion system 94.4 417.1 195.5
Oil/steam heat exchanger 17.2 75.8 30
Power block 37.2 164.3 65
Balance of plant (BOP) 25.7 113.8 75
Civil work 14.3 63.2 25.5
Project management and EPC 44 194.6 55.73
Project management 2.1 9.5 5
EPC (17%) 41.9 185.2 50.73
TOTAL 288.4 1274.6 558.03
2
EPC Management is a consultancy contract where the consulting firm only manages the engineering, procurement and
construction aspects with limited performance guarantees. The developer undertakes the project performance risk.
15 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Based on the numbers in Table 3, an estimated plant cost, if the EPC is carried out on a
package basis and not a turnkey basis, and negotiating system-wise prices and result in a plant
cost of Rs. 558 crores for 50 MW CSP trough plant (without storage) or Rs. 11 crores/MW.
2.3 Reasons for Higher Capex of International CSP Projects
As seen in Table 3, the cost of a typical international CSP project is almost twice that of
estimated prices of projects of the same size in India.
Major factors for this significant difference could be attributed to the following:
a. Premium pricing for recovery of sunk technology costs
b. Project cost commensurate with the feed-in tariff, which is a guaranteed payment
mechanism
c. Execution of the projects through the full EPC method, which requires higher premiums,
since the project risk is shifted from the project developer to an EPC company
d. A longer project preparation cycle time and higher costs of obtaining permits &
clearances
e. Higher wage costs
2.4 LCOE Evolution Comparison
The JNNSM launched by Government of India has been successful in promoting solar
projects and has kick-started the solar industry in India. The JNNSM has achieved the major
objective of bringing solar onto the center stage.
Phase I of the JNNSM witnessed a massive response from all stakeholders resulting in the
launch of a transformational process for the Indian solar industry during the last two years.
When Phase-I program of the JNNSM started, the CERC determined that prices were at
about Rs. 19 crores/MW and Rs. 15 crores/MW for photovoltaic (PV) and CSP projects,
respectively. At that time, the cost evolution pattern was clear neither for PV nor CSP. The
prevailing assumption at that time was that since the PV module manufacturing process
was dependent on silicon and the silicon prices were high, the possibilities for PV cost
reduction were considered slim. It was also felt that since the CSP was based on commonly
manufactured products, such as steel and mirrors, the prospects of CSP costs coming down
were considered to be more realistic. Therefore, the government-estimated project costs and
corresponding ceiling rates reflected the then level of technology cost projection information.
Since then, the solar PV project costs have come down sharply to a level of Rs. 7.5 crores/
MW, whereas despite the significant price lowering cost reduction proposed by the domestic
developers vis-à-vis international project costs, CSP projects were still priced significantly
higher at about Rs. 11–13 crores/MW.
2.5 Future CSP Cost Reduction Possibility
To address the issue of the level of cost reduction achievable in the second phase, one needs
to examine the cost drivers in detail to see whether localization can drive down the costs
or not. Currently, the components being imported in the case of the trough technology are
16 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
mirrors, HTF, receiver tubes, steam generators and steam turbine generators. In the case
of the direct steam generation process, viz. CLFR, the imports are limited to mirrors and
steam turbines.
The current import policy and concessional customs duties and exemption from excise duty
for the setting up of solar thermal project is a very favorable policy and which in fact makes
the imported components almost at par with the domestically manufactured components.
The import duties for solar thermal projects have been further reduced in the current
budget. It seems that there is not too much scope for additional import duties lowering
measures that the government can take. On the other hand, even if there is an assumption
that these components can be manufactured locally, the issue is whether that would result in
a significant reduction in costs or not.
The key components, such as mirrors, Heat Collector Element (HCE), Heat Transfer Fluid
(HTF), and solar steam generators, constitute only 25 percent of the cost of the CSP project.
The other key equipment, presently being imported, is the steam turbine generator, which
adds up another 10 percent to the project cost. This 35 percent import value is for the parabolic
trough technology. In the case of the tower or CLFR technology, the only component that
may need to be imported is the flat mirror and steam turbine, which will translate to about
20 percent of the project cost. The manufacture of low-iron glass-based mirrors involves
emptying the furnace of the earlier charge and replacing it with a new charge of low-iron
sand. Emptying the furnace and achieving the quality needed for solar application takes
around 10 days. Because the volumes are low, the mirror manufacturers typically schedule
the manufacturing twice a year. Unless there is sufficient volume, the mirror manufacturers
may find it more cost-effective to import the mirrors than to manufacture them locally. It is
understood that Borosil has a dedicated low-iron glass manufacturing facility that can cater
to about 600 MW in a year.
Assuming that local manufacturing would result at best in a 25 percent reduction of
certain equipment costs, this would translate into a reduction of 5–9 percent of the project
cost. Therefore in the next round of CSP solicitation, the project bid prices for solar
thermal projects are likely to come down to about Rs. 9 crores/MW, in the best case scenario,
which is very competitive in the CSP field in comparison with global CSP costs. The CSP
plants based on the tower technology can come down even further to a level of Rs. 8.5 crores/
MW, since in the case of the tower technology, except for the mirror, all other item can be
fabricated locally.
However, even with this price level, the stand-alone CSP project could hardly be competitive
with a solar PV project at the present rate of Rs. 7.5 crores/MW. This cost advantage of
PV technology over the CSP one is based on the assumption that both projects intend to
supply only the mid-day load, and the CSP project does not have storage. Under different
supply conditions, a CSP plant might be a preferable choice, given the technological ability
to accommodate storage and thus serve morning and evening peak loads. The project
cost definition for both PV and CSP projects presently doesn’t include the cost related
to maintaining the reliability of an electric system through the sufficient provision of
reserve and backup capacity. When such an aspect is incorporated into the cost (and
respective bid prices) of PV and CSP projects, the competitive advantage of the CSP option
becomes more distinct.
17 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Part II
Competitive Positioning of
Local Manufacturing in
CSP Technologies
3.
Present Scenario of
CSP Local Manufacturing in India
The following section elaborates on the current scenario of local manufacturing in India.
3.1 CSP Value Chain
The Indian CSP value chain in Figure 3 depicts the players involved from the design
stage to the end users. Currently the major part of activity in India is geared toward CSP
plant developers who are collaborating with international CSP technology providers,
EPC contractors, component manufacturers, and Indian power generation equipment
manufacturers to set up CSP plants in Rajasthan and Gujarat.
Figure 3:
Illustration of CSP Stakeholders in India
JNNSM and State Solar Policy Frameworks
Policy and Regulatory Framework by CERC and SERC
Solar Field Component
Manufacturer
Thermal Conversion and Power Trading
Storage Manufacturers Companies
Power Generation and Control CSTP
NVVN Power Transmission
Equipment Manufacturers Developers
Companies
Technical Design and
Construction Partners Power Distribution
Companies
Research & Development
End
Users
Note: Presently the NSM is limited to CERC and NVVN
Source: AQUA MCG (2011)
19 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 4:
Industry Groups and Other Organizations Identified as Key Stakeholders
INDUSTRY GROUPS OTHER STAKEHOLDERS
DIRECT INDUSTRY GROUPS g Engineering institutes (IITs, Energy
Developers; technology providers; glass and mirrors; electronic Institute India, TERI, ISP, UPES, EAI,
tracking, instrumentation and control systems; EPC or EPC Renewable Energy Institute, SEC)
management; support structures fabrication; heat exchangers g Industry associations (FICCI, CII,
& piping, electrical equipment; speciality industrial chemicals; FAST)
speciality industrial equipment; CSP advisory g NGOs and societies (Indiasolar, SESI)
g Government agencies and companies
(IREDA, PFC, NVVN, CERC,
INDIRECT INDUSTRY GROUPS MNRE, MOP, IM)
Iron and steel; metals; wires and cables; cement; synthetic materials;
g Banks and financial institutions (PSU
banks, IDBI, SIDBI, NABRAD, World
automotive industry
Bank, ADB, KfW/)
Identification of Key Players
The main equipment suppliers identified in India for each CSP technology are shown in
Table 5, separated by different subsystems’ components or functions: solar field, power
block, and EPC.
Table 5:
Vendors for Solar Field Components Currently Identified in India
RECEIVER MIRROR SUPPORT STRUCTURES PYLONS SSGOR HEAT
TUBE EXCHANGERS
g Schott g Saint Gobain g Skyfuel (PT) g Neo Structo Group g Thermax India
g Siemens g Asahi g Abengoa (PT, CR) g IOT Anwesha Eng& g BHPV Ltd
g AREVA g Guardian g Areva (LF) Cons. Ltd. g Thermal
g Neo Structo Group Systems (Hyd)
g IOT Anwesha Eng Ptv. Ltd.
g Flagsol (PT) g GEI Power Ltd.
g Siemens (PT) g BHEL
g KG Group (LF)
g Larsen &Toubro
g Solsys
g Shrijee Tower and
Solar Structures
g Jyoti Structures
g Associated Power Structures
DRIVE OR BALL JOINTS HTF HTF PUMPS PIPING
TRACKING
g Bosch g Vardhman g Dow Chemicals g Sulzer Pumps India g BHEL
Rexroth Bearings g Solutia Chemicals g ITT India
(India) Ltd. g Igus (India) g BASF g KSB India
g Parker Pvt. Ltd. g Bharat Petroleum g Flowserve India
Hannifin g Carbon g Hindustan Petroleum Controls Pvt. Ltd.
(India) Ltd. Rotofluid g PPIL, Bangalore
g Vickers Pvt. Ltd. g KBL, Pune
20 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 6:
Vendors for Power Block Components and Concept Engineering/EPC Currently Identified in India
COMPONENTS CONCEPT ENGINEERING OR EPC
g Siemens g Abengoa Solar g Infinia
g GE Energy g Areva g Clique Developments Pvt. Limited
g BHEL g Skyfuel g Sunborne Energy
g Gammon India Limited g Acciona g Thermax
g DF Power Systems Pvt. Limited g e-Solar g Suryachakra Power
g TurboTech g Brightsource g LANCO
g Maxwatt
g Triveni
3.2 SWOT Analysis of CSP Component Manufacturing Industry
A SWOT analysis of the CSP component manufacturing industry is given below.
Table 7:
SWOT Analysis for Local Manufacturing for CSP Components
Strengths Weaknesses
g Strong and established related industries in g Relative weaknesses in technologies for CSP plant
manufacturing in most of the components of development and component manufacturing.
the value chain—glass, precision equipment and g Gaps in infrastructure and uncertain government
turbines. support for performing local R&D for new and emerging
g Prior experience in developing skilled manpower technologies.
and resources through a large number of g High financial cost of capital ranging from 11% to 11.5%
established technical and engineering institutes. from local sources of finance, leading to higher tariff rates,
g History of established models of success in other supplier financing and finance from overseas sources.
technology intensive industries, such as public-
private partnerships (PPPs) and technology
transfer through joint ventures (JVs).
g Lower cost of unskilled labor resulting in lower
costs of components manufacturing and EPC.
Opportunities Threats
g Strong indications by central and certain state g Lack of long term visibility and commitment from
governments of readiness to promote solar government on Phase II and onwards, in terms of pricing
thermal power generation, such as many and policy framework.
incentives in the form of customs duty, solar g Lack of clarity on long-term market penetration of any
energy enterprises zones (SEEZs), exemption g One technology.
from electricity duty, establishment of solar parks g Core technology available only from two countries and
in SEEZs, and tax holiday. only a select few global players.
g Expectation of increasing costs of other g Lack of knowledge of CSP technology among banks and
technologies as there is more demand for fossil financial Institutions.
fuels. g Bureaucratic slow response in the provision of essentials
such as water, power lines, roads, approvals and facilities.
g Very tight project completion time lines (24 months) for
such new technologies, with long lead time for supply of
materials (for turbines, it is 18 months).
21 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
3.3 Participation of Related Existing Local Industries in Supplying CSP Components
and Systems
In the medium time range, India is expected to become a major CSP player behind the
United States and North Africa, and with a more prominent role than China, as depicted in
the Figure 4 below.
Figure 4:
Production and Consumption of CSP Electricity by 2050 (TWh)
1,600
1,400
1,200
1,000
TWh
800
600
400
200
0
North South Middle China Africa EU+ Turkey India Pacific Central Russia
America America East Asia
Consumption Production
India’s National Solar Mission includes measures aiming at driving down costs and
encouraging domestic solar manufacturing in order to rapidly expand the use of PV and
CSP systems. The plan also proposes scaling up centralized solar thermal power generation
with the aim of achieving cost parity with conventional grid power by 2020 and the full
necessary energy infrastructure by 2050. With the objective of 20 GW of solar power by
2022, and a first step of 1.3 GW of solar power by 2013 (1.1 GW grid-connected and 0.2 GW
off-grid), this is the most ambitious solar plan that any country has laid out so far.
To bring this solar plan to success, existing Indian industries have to be incentivized to
participate significantly in supplying CSP components and systems. Many traditional
industries that could take an active part in CSP technology development have been identified.
Most of them need only a modest effort to adapt their products and manufacturing processes
to meet the demand of the CSP industry. Table 8 shows examples of traditional industries
that are or could be successfully involved as component manufacturers for the CSP industry.
In particular, the mass production processes used in the automotive industry could be
implemented for CSP component manufacturing.
Besides the industries mentioned in Table 8, other traditional industries could also enter the
CSP market:
g Technical supervising companies are able to achieve a high quality of control to reduce
risks specifically in the scaling process by using advanced metrology techniques, such as
artificial vision.
22 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
g Electronics industry, with several leading companies based in India, uses glass-to-metal
seals in TV cathode ray tubes. These seals are of special importance in the manufacturing
process of PT receiver tubes.
g Heat-trace system suppliers for oil and gas industry could provide such systems to trace
molten salt piping for the thermal storage of CSP plants.
g Chemical industry could support the development of improved HTF or storage media.
Furthermore, India’s coating and paint industry is very active, with a considerable
expertise in sol-gel and sputtering techniques, which are of special relevance in the
manufacturing process of PT receiver tubes.
Table 8:
Traditional Industries Potentially Involved in CSP Industry and Components
Manufactured in Future
EXISTING INDUSTRY COMPONENTS POTENTIAL SUCCESES
AUTOMOTIVE Engines
g Sener (SenerTrough)
Ferrostaal (with Cleveland automotive industry)
SES (with GM)
GLASS Mirrors
g Flabeg, Rioglass, Saint-Gobain, Guardian
METAL Structures
g Shuff Steel/SES, Gossamer/Acciona
POWER AND PROCESS HEAT g Power block Siemens, Ormat
g Balance of plant Babcock & Wilcox, Victory Energy, GE, ALSTOM
g Heat exchangers
g Receivers
MACHINE TOOLS AND Drive
g eSolar (navigation drives manufacturer)
ROBOTICS mechanisms
CHEMISTRY g Heat Transfer Dow Chemicals, Solutia
Fluid
g Storage fluid
To place the prospects in perspective, one may remember that five years ago only a small
number of companies with specific expertise and a variety of research institutions were
involved in R&D projects in this field. Today the number of private companies involved
in this sector has strongly increased, and the newcomers are not only start-up companies,
but also established corporations coming from traditional industries, such as automotive
(processes for car glass manufacturing, metal stamping, and coating can be adapted to CSP
components), glass, steel, power, or construction. With a moderate R&D effort, some of
them were able to grab significant market shares. Nonetheless, the competition between CSP
players will increase, enlarging the need for R&D activities to develop cheaper and more
efficient components. That is why research collaborations between private companies and
research laboratories are a key factor in developing the components and systems that will
bring CSP technologies to success.
23 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
4.
Analysis of Manufacturing
Capabilities of Specific Components
This chapter elaborates the manufacturing capabilities for specific CSP components.
4.1 Mirror Manufacturing Industry
The following section details out the mirror manufacturing industry in India.
Manufacturing Capability Requirements
Mirrors used in CSP plants are different from traditional mirrors in reflectivity, durability,
and strength. The fabrication of the needed extra clear glass requires low-ferrous sand that
is not easily available in India. Furthermore, this glass has no other application in India and
therefore must be made specifically for solar CSPs.
Industry Structure
The glass industry in India has a production capacity of around 0.68 Mtons per year.
Production of float glass is about 0.51 Mtons, which is nearly 75 percent of the total glass
production in India. Sixty percent of the world’s high-quality float glass is produced by four
companies: Asahi, NSG Group (Pilkington), Saint Gobain, and Guardian. Using a metalized
polymer film that can be laminated to an aluminium substrate, Skyfuel offers a competing
technology with similar functionality.
24 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 9:
Major Manufacturers of Mirrors in India
PLAYER PROFILE
ST. GOBAIN Has the capacity to manufacture 1,500 tons/day of float glass in Sriperumbudur plant. It is
setting up additional facility for 950 tons/day in Bhiwadi (Rajasthan), which will be ready
in 6 months. The existing facility can make extra clear float glass required as base glass for
mirror manufacturing, but does not have the facility to make CSP quality mirrors.
ASAHI INDIA AIS Float Glass has two manufacturing units located at Taloja and Roorkee with a
combined capacity of 1,200 tons per day. The Roorkee float glass unit has an installed
capacity of 700 tons/day. AIS Float Glass commands a nearly 29% share of the Indian
float glass market.
GUJARAT Gujarat Guardian Limited is a joint venture company that has set up a float glass plant in
GUARDIAN India in technical and financial collaboration with Guardian Industries Corp., USA. The
factory is set up in India at Village Kondh in Bharuch district of Gujarat. GGL currently
makes float glass and mirror glass at a float line with 630 tons/day of pull tone capacity
and 4.2 Mm2/year mirror production facility.
SKYFUEL Using a metalized polymer film that can be laminated to an aluminum substrate,
Skyfuel offers a competing technology with similar functionality. Skyfuel has signed a
Memorandum of Understanding (MOU) with Megha Engineering and Infrastructures
Limited (MEIL) regarding the use of its PT collector in CSP projects (MEIL has been
awarded 50 MW in Phase I of the JNNSM scheme).
3M 3M also manufactures polymer film based mirrors.
Table 10:
Gaps in Local Manufacturing
GAPS POSSIBLE SOLUTION
g High-quality low-iron sand availability in India g Import low-iron sand or low flat float glass to
make mirrors
g Technology gap for some of the players g JV/licensing from CSP mirror manufacturers
(bending, mirroring)
Cost Reduction Because of Local Manufacturing
Cost reduction because of local manufacturing is expected to be in the range of 10 percent,
but this may require the development of local glass handling and logistics skills. Specialized
tools, such as specialized trucks with air suspension and custom-tailored steel frames for
mirror transportation, should be provided by the manufacturers. The reduction can be
attributed to lower shipment costs, lower labor costs, and ease of handling.
Higher cost reductions (up to 30–40 percent) in the short term can be achieved by importing
high-quality low-iron sand flat float glasses with the subsequent bending and mirroring
processes being carried out locally with specialized equipment available in the market.
25 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Some developers are also exploring the possibility of importing low iron flat float glass and
using Glasstech’s 3 roll computerized glass bending machine to manufacture the mirrors.
This can result in 40% reduction in cost.
Relative Market Growth and Market Dynamics
As mentioned before, the sales of mirrors—assuming 300 MW/Year of CSP installation—
would only constitute a small proportion of overall sales for mirrors (5–10 percent), but the
local industry considers it a growth sector with important potential.
International players, such as Saint Gobain and Gujarat Guardian, which have the required
technology and the manufacturing facility in India, will look to manufacture mirrors locally
provided there is enough local demand. Players like Asahi Glass and some other local players
may seek the licensing route. As of now, the entry of players like Flabeg and Rioglass in
ventures on their own is not envisaged in the near future.
Table 11:
Minimum Investment Required for CSP Parabolic Mirror Manufacturing
PHASES ADVANCE COMPONENT INTEGRATED
COMPONENT COATING MIRROR
ASSEMBLY MANUFACTURING
INVESTMENT (Rs. crores) 12–14 60 120
If the float glass manufacturing facility already exists, only the raw material has to be
imported so that extra clear glass can be made. A SWOT analysis of the local manufacturing
capability of mirrors is given below.
Table 12:
SWOT Analysis for Local Manufacturing of Mirrors
Strengths Weaknesses
g Existing set up of float glass manufacturing g High capital cost.
and company g Skilled manpower required for bending and mirrors
g Availability of technology with international g Minimum demand is large for achieving efficiencies
players who are doing local manufacturing g Testing facility and industry standard is not available
g Availability of skilled manpower to make extra
clear glass
Opportunities Threats
g Mirrors can provide extra high margin revenue g Delivery gaps from suppliers for meeting quality
to established players requirements
g Importing low iron Flat Float Glasses & g Insufficient clarity in the road map of CSTP as it is
Bending & subsequent mirroring has the high capital investment business
potential to reduce cost substantially. g Skyfuel using a metalized polymer film on an
aluminium substrate, which is a competing
technology
26 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
4.2 Fabrication Industry for Support Structures
The following section details out the support structures manufacturing industry in India.
Manufacturing Capability Requirements for Parabolic Trough Collectors
Support structures include mirror support, pylons, central stem and support arms.
The concentrator mirrors are installed on a rigid metal structure, which gives them the
parabolic shape necessary to concentrate the radiation in their linear focus. Structures are
manufactured by high-precision fabrication processes with galvanized steel or aluminium
as the raw material. Because the structures are exposed to open air, specific grades of steel
are required. Manufacturing process requirements are different even for different types of
parabolic trough collector (PTC) technologies. The design and type of PTC structure and
technology determine the layout and cost of the manufacturing line.
Industrial Capability
The fabrication industry in India is fairly mature. Fabricated components are made locally for
several applications and industries. Companies in the automotive component industry are
capable of manufacturing support structures. For CSP manufacturing, several manufacturers
in India are entering the market using JVs or collaboration with foreign counterparts.
Prominent global players for support structures are Flagsol, Solargenix, Sener, Albiasa
Solar, and SkyTrough. In India, Jyoti structures Ltd under license from SBP, and Megha
Engineering under license from Albiasa have already commenced fabrication. Some more
potentially interested players are Bharat Forge (automotive component manufacturer),
Larsen & Toubro (manufacturing, engineering, and construction), and Kalpataru Power
Transmissions (operating in EPC and manufacturing for the real estate and electrical
transmission industries). Other potential players could be AMW Auto Component
(automobile component manufacturing), Anand Motor Products (automobile component
manufacturing), JCBL (automobile manufacturing), Tata Autocomp (automobile component
manufacturing), and HEC (Engineering Fabrication).
Cost Reduction Because of Local Manufacturing
According to the feedback received from local manufacturers who have JVs with overseas
players, the cost reductions caused by local manufacturing are around 15 percent, because of
differences in labor costs and savings in logistics costs and custom duties.
Local manufacturers who claim to have the capability to manufacture the structures on their
own are suggesting cost reductions of around 30–40 percent. However, at this time, it is
difficult to know the precision and quality of products to be supplied by companies that are
attempting to fabricate these components for the first time.
Relative Market Growth and Market Dynamics
Both domestic and export markets offer huge opportunities. Approximately 300 MW of
PTC installations per year would lead to a market size of approximately Rs. 450 crores. The
27 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Middle East and North Africa (MENA) could be a potential export market in the future. A
SWOT analysis of the local manufacturing capability of support structures is given below.
Table 13:
SWOT Analysis for Local Manufacturing of Support Structures
Strengths Weaknesses
g Existing industrial base & huge market g Testing facility is not available.
potential has lead local manufacturers to g Structures have to be tested under Indian conditions.
develop this component indigenously via
Licensing/JV route
Opportunities Threats
g Export markets g If large number of players enter the market, then
g Huge Potential to reduce costs & still earn profitability after 5-7 years (Phase 3) might be a
decent margins. concern.
4.3 Receiver Tubes Manufacturing Industry
The following section details out the receiver tubes manufacturing industry in India.
Manufacturing Capability Requirements for PTC
The receiver (power tower receiver, PTR) is a critical component for the performance of the
PT solar power plant because it is in the receiver where much of the energy losses (optical
and thermal) originate. The selective surfaces of the receivers must be highly absorbent and
have low thermal emissivity at the operating temperature.
Industry Structure
Currently there are no players in the Indian market who are capable of manufacturing PTR.
While there are four prominent players in the global market, licensing and JVs are one route
to a profitable opportunity. Another is indigenous development of technical know-how.
Local companies venturing into this area can expect a market not only from CSP, but also
from industrial heat applications. Some of the global players may set up their own Greenfield
ventures in India in Phase II or Phase III, since the minimum demand requirement for any
one player is 200 MW.
Leading players include Siemens, Schott, Archimede Solar, and Huiyen. Siemens and Schott
have a strong dominance in the PTR market, but given the high margins for the existing
players, there is the potential for much activity in receiver tube development and marketing
in the near future.
Current Status of Local Manufacturers
While India will be in a position to develop its own expertise for reflective coating in the
near future (1–2 years), expertise in the metal-glass seal is still lacking, even if the Indian
electronics industry has some experience in this field. If Indian companies develop the
technology indigenously, a large number of patents for receiver tubes internationally will
force them to work on new concepts, which will require extra efforts in R&D.
28 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 14:
Gaps in Local Manufacturing
GAPs POSSIBLE SOLUTION
g Technical know-how for Solar Selective g Expertise expected to be developed by 2014
Coating & Anti-reflective coating
g Technical expertise for metal glass seal g R&D either by the government or in PPP mode is
required
There are Indian players who are indigenously developing this technology, namely, NAL
Bangalore, Milman Thinfilm Pvt Ltd Pune, KG Design Services, and Borosil. However,
the technology is not fully developed, and it would take 3–5 years before this is ready for
commercialization.
Cost Reduction Because of Local Manufacturing
Currently, receiver tubes must be imported. Local manufacturing by global players
will reduce costs by approximately 10 percent. Large cost reductions (30–35 percent) may
be possible.
Relative Market Growth and Market Dynamics
Only high-quality receiver tubes can be used for CSP applications. Receiver tubes can
also be used for industrial heat applications (for example, the pulp and paper industry),
thus providing added incentives for manufacturers. Assuming 300 MW/year of PT plant
installation, the market size would be Rs 450 crore/year for CSP itself. For heat applications,
the market size per year would also be substantial. A key growth driver would be high
investment in the R&D space by the government or in a PPP model. A SWOT analysis of the
local manufacturing capability of receiver tubes is given below.
Table 15:
SWOT Analysis for Local Manufacturing of Receiver Tubes
Strengths Weaknesses
g Indian Institutions are in a position to g Technology Transfer from global players maynot come
develop this technology provided Govt. easily
support is provided g A large part of the cost is estimated to be from
Propriety knowledge.
g Globalplayers may not have any major advantage in
setting up manufacturing base in India
Opportunities Threats
g Local players who develop the necessary g Lack of clarity in demand may deter investments in the
technological knowhow indigenously can reap R&D space by privateplayers
rich rewards. g The Local companies who develop this technology may
g Large supplementary demand from Industrial need 2-3 years to prove their technology under real
Heat Processes conditions.
g Large Cost reduction Possible if Indian Players
are able to develop the technology
29 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
4.4 Tracking and Drive Mechanism Industry
The following section details out the tracking and drive mechanism manufacturing industry
in India.
Manufacturing Capability Requirements
The purpose of the drive mechanism is to ensure that the reflectors are optimally positioned
during the whole day to track the sun’s position. Thus, these mechanisms are a decisive
parameter to attain a high degree of efficiency.
Industry Structure and Market Assessment
Some players in India (such as L&T) have been supplying tracking solutions for military
applications and may be in a position to develop the technology on their own in the future.
For Phase I, the drive mechanisms for CSP applications (costing about Rs 2.8–3.5 lakh/unit)
will mostly be imported. Nevertheless, with companies having the manufacturing base for
certain parts that are also used in wind power application, those companies are currently
considering the option of adding manufacturing lines for certain parts of tracking devices
for CSP as well. Some components of tracking devices for PT technology may potentially be
manufactured locally by international players.
Local Manufacturing Capability Assessment
Table 16:
Indian Manufacturing for Parabolic Trough, Current Status and Future Scenario
(assuming at least 500 MW/year of CSP installation in India)
COMPONENTS APPROXIMATE COMPLEXITY CURRENT FUTURE
COST (%) STATUS STATUS
HYDRAULIC POWER 20% Standardized Imported Local
PACK
CYLINDER 20–30% Specialized Imported Local
SENSORS 20% Specialized Imported Imported
CONTROLLER 30–40% Specialized Imported Imported
Source: AQUA; CENER
For CRS technology, the percentage cost of each individual sub component will vary.
Table 17:
Gaps in Local Manufacturing
GAPs POSSIBLE SOLUTION
Proprietary know-how for sensors & controller Indigenous R&D by Private Players like L&T
25–30% of total cost is propriety know-how Indigenous R&D can reduce cost by 35–43%
30 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Relative Market Growth and Market Dynamics
Since the market for tracking devices will be dependent to a large extent on the CSP plant
installation, the key growth driver for local manufacturing will be clarity on the demand
side. Some of the components for tracking devices are similar to the ones being used for
wind power. Hence, the capital expenditures (capex) required will mostly be incremental.
Local manufacturing for tracking devices will require a minimum demand of 500 MW/
year of CSP plant installation to justify the incremental capex (for international players with
an established manufacturing base in India). A SWOT analysis of the local manufacturing
capability of tracking devices is given below.
Table 18:
SWOT Analysis for Tracking Device Manufacturing in India
Strengths Weaknesses
g Similarity in some of the components with g Technology Transfer from global players is required•A
Wind Power implies that only incremental large part of the cost is estimated to be from Propriety
capex will be required knowledge.
g Low manpower costs can provide a g Thus local manufacturing will provide only 5-10% cost
competitive edge reduction
g Tracking devices are already being
manufactured and used for solar power steam
generation and military applications
Opportunities Threats
g Local players who develop the necessary g Lack of clarity in demand may deter manufacturers
technological knowhow indigenously can reap from setting up even incremental local manufacturing
rich rewards. base
g If min share of local project costs increasesin g Unclear incentivesmay deter global players from
phase 2, then TADM that requires only collaborating affectively with local players for mutual
incremental capex gets a boost. benefits
g Irrespective of the technology, this sector is
expected to have a market demand as per
government plans.
4.5 HTF (Synthetic Oil) Industry
The following section details out the HTF industry in India.
Manufacturing Capability Requirements
The role of the heat transfer fluid (HTF) that circulates through the solar field is to absorb
the energy provided by the absorber tube in the form of enthalpic gain, by increasing in
temperature as it goes through the loops in the solar field. The solar field outlet temperature
is restricted by the HTF properties, which means that the fluids that can perform these
functions are also limited. The commercially proven technology is limited to a temperature
of around 400ºC. High-purity propylene crude and ethylene crude are the main raw materials
to produce these fluids; sulphonation and blending are the two major production processes.
31 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Industry Structure
Dow and Solutia are currently present in India and are the leading players. Indian Oil and
Reliance Petrochemicals are producing industrial oils and are some of the potential players
that may manufacture it locally. However, with the demand being uncertain as of now, it
appears less probable that Indian players will invest in R&D and manufacturing facilities.
Current Status of Local Manufacturers
Since there are currently no local players, global players are meeting the demand of Phase I.
The main raw materials for the production of ethylene crude and high-purity propylene crude
are the most important factors for setting up production facilities in any region. In India,
ethylene crude is produced by Reliance; high-purity propylene crude is not manufactured
locally. The required sulphonation and blending processes can be done in India.
Table 19:
Gaps in Local Manufacturing
GAPs POSSIBLE SOLUTION
g Availability of high purity propylene crude g Import in the short term
g Technical expertise for sulphonation and g R&D collaborations with petrochemical players
blending
Cost Reduction Because of Local Manufacturing
No cost reductions are expected in the short and medium term. In the long term, it is difficult
to estimate the extent of cost reduction because of the high variability of crude prices. Possible
reductions in cost can occur if global players setup manufacturing facilities in India.
Relative Market Growth and Market Dynamics
Supply-demand mismatch coupled with higher crude prices have led to substantial increases in
prices in the past two years. Demand for synthetic oil for solar applications forms a substantial
portion of the total industrial demand of synthetic oil. A demand of 300 MW/year from PTC
installation would lead to a market size of Rs. 240 crores/year. If the demand from new PTC
plants continues to rise (as is expected), additional manufacturing capacity would have to be
added. A SWOT analysis of the local manufacturing capability for HTF is given below.
Table 20:
SWOT Analysis for Local HTF Manufacturing
Strengths Weaknesses
g Existingpetrochemical refining companies in g Highpurity propylene crude will have to be imported.
India can develop the required expertise or g HTF fluid would need to be tested for extended period
enter into licensing/JV with emerging players of time.
in this segment like Radco
Opportunities Threats
g Indian demand base (Rajasthan/Gujarat) in g HTF for solar application has only limited use outside
close proximity to existing petrochemical of the solar demand. If the demand from PTC were
refining capacities, thus reducing logistics costs to fall drastically, the profitability might be severely
substantially. impacted.
32 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
4.6 Turbine Manufacturing Industry
Manufacturing Capability Requirements
CSP turbines have slightly different operational requirements than conventional steam
turbines. Indeed, they have to endure frequent load variations and numerous start-up and
shut-down procedures, so transient and part load operations are critical. Besides, they usually
have a relative small capacity (50–100 MW) compared to turbines for traditional fossil fuel
power plants (200–1,000 MW). In order to justify the investment cost for a CSP plant, which
will not run continuously for 24 hours per day, high demands for efficiency and increasing
economic returns are imposed on the CSP steam turbine. Additionally, day and night cycling
often requires a large number of starts and rapid start-up capabilities from CSP steam turbines.
Considering the annual power production operations, the short start-up times of the turbines
are of great value to the CSP plant owner as they decrease the down time of the plant.
Country Level Capacity and Production
The Indian turbine market grew at a rate of 44.1 percent between 2004–05 and 2008–09. The
growth was the result of additional power generation capacity. The demand for turbines is
primarily met by domestic production, which was valued at US$912 million for 2008–09,
while turbine installation in India was valued at US$1,136 million. Both imports and exports
of turbines have grown at over 35 percent over the last few years. However, total imports of
turbines largely outpace exports. In recent years, turbine imports from China and Korea
have increased.
Current Status of Local Manufacturers
Table 21:
Major Manufacturers of Turbines in India
PLAYER PROFILE
BHEL BHEL is the largest state-owned engineering and manufacturing company in India catering to
the energy and other infrastructure sectors.
L&T–MHI Larsen & Toubro Limited (L&T) is a technology, engineering, construction, and manufacturing
company. It is one of the largest and most respected companies in India’s private sector.
GE Triveni is an engineering company that supplies components for the sugar, power, and water
TRIVENI industries. It is one of the largest suppliers of steam turbines in India and the first such
LTD (JV) company to get ISO 9001:2000 certification for turbine manufacturing.
SIEMENS Siemens consolidates its innovative offerings in the energy sector by combining its full range
INDIA expertise in the areas of power generation (PG) and power transmission & distribution
(PTD). Utilizing advanced plant diagnostics and systems technologies, Siemens provides
comprehensive services for complete power plants and for rotating machines, such as gas and
steam turbines, generators, and compressors.
Leading players, such as BHEL, have the capability to supply CSP specific turbines in the
short term. GE-Triveni may also look at >60 percent indigenization in the medium term
to reduce costs. Some other players, such as Maxwatt, have already supplied smaller CSP
turbines (2–5 MW) to some developers in India.
33 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 22:
Gaps in Local Manufacturing
GAPs POSSIBLE SOLUTION
Know-how for meeting complete specifications Expertise expected to be developed by 2012
Tight schedules due to demands on capacity Successful implementation of Phase 2 and certainty in
demand by 2013
Cost Reduction Because of Local Manufacturing
Cost reduction because of the local manufacturing of CSP turbines is expected to be in the
range of 12–17 percent for global players. With BHEL and other local players coming into
the picture, a cost reduction of 22–32 percent is envisaged.
Relative Market Growth and Market Dynamics
The key growth driver for turbine manufacturing in India will be the strong demand from
the power sector. The expected addition is 100,000 MW in 2017 in terms of demand of
power generation installations. However, CSP is expected to contribute to less than 3 percent
of the energy generated via thermal power cycles.
Competitive Factors
An important parameter for solar thermal power generation is the efficiency of the turbine.
At present, local manufacturers are developing the expertise to make CSP turbines meeting
high efficiency requirements. The second important parameter is the lead time for supplying
the customized CSP turbines. Current turbine manufacturers take 16–24 months to supply
turbines once the order is placed. This is primarily because of the strong demand for turbines
from the coal and gas power generation segment, which competes with the CSP segment,
given the limited capacity for local manufacturing. Long lead times pose a challenge, given
the tight deadlines for Phase I JNNSM projects, especially under the current dynamic
growth of the gas thermal generation market driven by falling natural gas prices. A SWOT
analysis of the local manufacturing capability of turbines is given below.
Table 23:
SWOT Analysis for Local Manufacturing of Turbines
Strengths Weaknesses
g Technological know how already available g Low demand from CSTP segment as compared to
withsomeInternationalcompanies with Indian coal and gas based thermal power generation segment
presence& with Leading Indian players like g CSTP Turbine demand will be much less than
BHEL conventional ones like Coal and/or Gas based in
g Highly mature Turbine industry implies that theforeseeable future
very little incremental g Indian Manufacturers have yet to execute the first
50MW or greater work order of CSTP Turbine
Opportunities Threats
g Collaboration with CSTPTechnology providersis g Lack of clarity in demand may deter manufacturers
an option for localturbine manufacturers. Some from developingCSTP specificmanufacturing
steps have already been taken in this direction. For expertise.
e.g. BHEL has signed an agreement with Abengoa. g Unclear incentivesmay deter CSTP Technology
g In the future, export market especially in the providers from collaborating affectively with local
MENA region may form a substantial portion of players for mutual benefits
sales.
34 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
4.7 Solar Steam Generator Manufacturing Industry
The following section details out the solar steam generator manufacturing industry in India.
Manufacturing Requirement
The solar steam generators are a special type of heat exchangers that help in the transfer of
heat from HTF/molten salts to water/steam.
Leading Players
Main potential solar steam generators in India are presented in Table 24.
Table 24:
Potential Lead Players in Solar Steam Generator Manufacturing
PLAYER PROFILE
THERMAX (INDIA) Has the technological know-how and the manufacturing capability to manufacture
SSG for both HTF and molten salts use in PT, LF, and CR technologies.
BK AALBORG Denmark-based company with manufacturing facilities in Denmark and China.
BHEL (INDIA) Largest state-owned engineering and manufacturing company in India catering to
the energy and other infrastructure sectors.
HOLTEC Designs and fabricates a broad spectrum of solar power plant equipment, such as
TERNATIONAL steam generators, superheaters, reheaters, water-cooled or air-cooled condensers,
low-pressure feedwater heaters, and high-pressure feedwater heaters.
CETHAR VESSELS For more than 25 years has been manufacturing all types of combustion and
recovery boilers, heat recovery steam generators, power plant piping systems, water
treatment plants, and cooling towers for thermal power plants.
VESPL More than 25 years of experience in the design, manufacture, and supply of various
types of sophisticated boilers and boiler components.
INDUSTRIAL Manufactures oil-or gas-fired boilers, high-pressure power-generating water
BOILERS LTD tube bi-drum boilers, heat recovery boilers for diesel generator and gas turbine
applications, heat recovery equipments, and water treatment plants.
ISGEC JOHN Leading manufacturer of wide range of boilers and pressure vessels.
THOMSON
GODAVARI GEL is already supplying heat exchangers for some of the solar thermal projects
ENGINEERING LTD. under Phase-I.
As mentioned already, solar steam generators are a special variety of heat exchangers. Hence,
only incremental capex is required for the companies already manufacturing boilers and
heat exchangers. However, for international companies such as BK Aalborg that do not have
a manufacturing base in India, the licensing or JV route might be more appropriate, since
they may be more willing to provide technological know-how. For local manufacturers,
participation will require incremental capex. Companies like BHEL are in a position
to develop the required technological know-how on their own and have the required
manufacturing facilities to produce solar steam generators.
35 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Relative Market Growth and Market Dynamics
The key growth driver for solar steam generator manufacturing in India will be the
demand from local CSP installations. However, Indian companies like Thermax and
other local players may be in a position to supply this component to meet demand from
MENA countries. The key competitive advantage for local manufacturing will be the low
staffing costs, coupled with the required technological know-how already present with
Indian companies. The minimum requirement in MW to catalyze local manufacturing
is very low, since some Indian companies today are in a position to fulfil even small
orders. A SWOT analysis of the local manufacturing capability of solar steam generators is
given below.
Table 25:
SWOT Analysis for Solar Steam Generator Manufacturing in India
Strengths Weaknesses
g Technological know already available with g Opportunities for year on year cost reductions
some local companies expected based on economies of scale will be small
g Highly mature boiler/heat exchanger industry
implies that only incremental investment will
be required for the leading players
Opportunities Threats
g Collaboration with global players is an option g Lack of clarity in demand may deter manufacturers
for companies not havingknow-how from setting up even incremental local
g In the future, export market especially in the manufacturing base
MENA region may form a substantial portion g Unclear incentivesmay deter global players from
of sales. collaborating affectively with local players for
g If the local component in the total project mutual benefits
cost is further increased, it will boost local
manufacturing
4.8 HTF Pumps Manufacturing Industry
The following section details out the Heat Transfer fluid (HTF) pumps manufacturing
industry in India.
Manufacturing Capability Requirements
The HTF pumps used in CSP plants are used to transport thermal fluids to heat exchangers
and are similar to the ones being used for refineries. They must be fully compliant with ISO
13709/API 610. Some solar installations have a primary and auxiliary HTF pump, both built
to meet the plant conditions. Their design should keep in mind the wide fluctuations in
operating conditions expected in CSP power plants.
36 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Current Status of Local Manufacturers
Table 26:
Players in HTF Pump Manufacturing in India
PLAYER PROFILE
ITT INDIA They have the capacity to meet the demand of up to 1,000 MW/year of CSP installation
(HTF–thermal oil). They have a plant in Baroda that can make complete pumps. They have
local sources for raw material, and they estimate their pumps would cost 40–50% less than
imported pumps.
KSB INDIA Can provide auxiliary pumps from a local manufacturing base. HTF main pumps need
to be sourced from their parent company in Germany. Molten salt pumps will need to be
sourced from Rehintoor Germany.
FLOWSERVE Can provide HTF pumps for CSP plants with less than 50 MW capacity from their
PUMPS INDIA local manufacturing base. For higher capacities, they need to be sourced from their
LIMITED parent company.
Cost Reduction Because of Local Manufacturing
Cost reduction because of local manufacturing is expected to be in the range of 30–50
percent. The reduction in manufacturing costs can be attributed to lower labor costs in India
than in developed countries. This will result in lower tooling and lower component costs to
be used in manufacturing. Since a local manufacturing base already exists for HTF pumps in
India, any further cost reduction in the immediate future is not envisioned.
Relative Market Growth and Market Dynamics
The local HTF pump industry is not fully reliant on CSP industry, but sees it as important
potential market. As mentioned before, although the sales of HTF pumps, assuming 4,000
MW of CSP installations by 2017, would constitute a small proportion of overall sales for
HTF pumps (5–10 percent), the industry sees it as a growth sector.
Since the industry is at a stage where it can fulfil the demand originating from CSP power
plants installations with ease, it is not expected to be a constraining factor to the growth of
CSP power plants in India. In addition, the HTF pump technology is relatively mature, and
not much reduction in cost is expected from technological breakthroughs in the near future
(<10 years). Once the industry size becomes very large, further innovations specific to solar
CSP might be possible.
The growth rate for HTF market in India for CSP power plants would be directly linked to
the underlying requirement from CSP power plant installation. Since the cost will be lower by
15–20 percent, HTF can be exported as the manufacturers here gain experience in the CSP
market. A SWOT analysis of the local manufacturing capability for HTF pumps is given below.
37 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 27:
SWOT Analysis for Local Manufacturing for HTF Pump
Strengths Weaknesses
g Low Manufacturing Cost g Opportunities for year on year cost reductions
g Availability of highly skilled labour at relatively expected based on economies of scale will be small
lower costs.
g Mature industries for Refineries & Thermal
Power Plants
g Availability of technology with international
players who are doing local manufacturing
Opportunities Threats
g Can provide additional source of high growth g Compromise on API 610 quality standards due to
revenues toexisting players aggressive price bidding by players
g In the future, export market especially in the
MENA region may form a substantial portion
of sales.
38 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
5.
Summary of
CSP Local Manufacturing
Potential and Cost Reduction
The following chapter provides the CSP local manufacturing and cost reduction potential.
5.1 Local Manufacturing Capability Assessment and Export Potential
Interactions with players in the CSP field have resulted in the assessment summarized in
Table 28 of the local manufacturing capability for CSP specific components and the potential
for export to regions, such as Middle East and North Africa (MENA) and South Africa.
Table 28:
Preliminary Local Manufacturing Capability and Export Potential to MENA
Subsystem Component Ormaterial Local Manufacturing Export Potential to
Capability Mena
Solar Field Receiver Tube 1 1
Mirror (Pt) 2 1
Mirror (Cr) 3 1
Structures or Pylons 4 3
Solar Steam Generators 4 4
Drive/Tracking (Pt) 2 3
Drive/Tracking (Cr) 1 2
Ball Joints 4 3
Htf (Oil or Molten Salts) 1 1
Htf Pumps or Piping 4 3
Thermal Storage Molten Salts 1 1
Other Components 4 3
Power Block Turbines 3 4
Other Components 4 4
*Ranking is from 1 (low) to 4 (high)
39 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Indeed, MENA could be a potential export market in the future, but only if India becomes
a competitive manufacturing base for equipment as the MENA region is also looking to
growing domestic industries for local manufacturing of CSP components. The table below
analyses the export potential to MENA particularly. All projections concerning export
options to MENA need to be considered with caution, since such opportunities might not
be realized—at least in the near- and medium-term future.
Future investments in development of local manufacturing units (especially for specialized
equipment) will depend on several factors:
g Successful implementation of solar thermal projects for the Phase 1 participants.
g Firm government commitment for the development of solar thermal power plants.
g R&D help from Indian institutions or JVs/Licensee arrangements with international
companies.
g Easy availability of financing options for investment in a new and rapidly developing
technology
5.2 Timeline for Indigenization
Interactions with players in the CSP field have resulted in the assessment of the timelines for
manufacturing summarized in Table 29.
Table 29:
Timeline for Indigenization
COMPONENTS PHASE I PHASE II PHASE III
(1 to 3 years) (4 to 7 years) (8 to 12 years)
SOLAR FIELD Conclusion:
Site Development Solar Field:
g Mirrors: Partial
Foundations & Pylons Manufacturing
Mirrors PT and PD3 is possible in
Mirrors CR and LF phase I with full
indigenization in
Frame and Support Structure phase II
Receiver tubes PT and LF
g Receiver Tubes,
Receivers for CR and PD
HTF, Drive &
HTF Synthetic Oil Track Mechanism:
Drive and Track PT and LF Indigenization is
estimated by phase
Drive and Track CR and PD
III
POWER BLOCK Power Block:
Solar Steam Generator g Turbines:
Indigenization
Turbine may happen in
Cooling System phase I itself, but
is expected to get
BOP
stabilized by phase
Local Import II
Source: AQUA MCG, CENER
3
The technology for mirror manufacturing would be available at these phases provided that low-iron sand is available in India. Otherwise
low-iron sand would have to be imported. Also valid for Mirrors CR and LF
40 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
5.3 Minimum Demand Requirements
As depicted in Figure 5 below, local manufacturing for all CSP-specific components will
require less than 500 MW/year of demand. For receiver tube (PTC) and tracking devices
manufacturing to happen in India, significant R&D is required within India or a JV/
Licensing from international players.
Figure 5:
Minimum Demand Requirements (MW/year)
6 Turbines
Reciever Tube - PTC
5
Mirrors PTC - Tracking
4 Receiver Tube - LF Complete Manf. Devices PTC
Structures - PTC
HTF
3 Structures - CR
Tracking
Complexity
in Technology
Mirrors PTC - Partial Manf. Devices CR
2 Solar Steam Generators Mirrors Flat - CR
Molten Salts
1
The bubble Size represents the market size of a particular component assuming PTC:CR:LF is installed
0 in the ratio of 60:33:7. The colour intensity represents local manufacturing readiness
0 100 200 300 400 500 600
Source: AQUA MCG
5.4 Expected Cost Reduction
Interactions with players in the CSP field have resulted in the assessment of expected cost
reductions summarized in Table 30.
Table 30:
Assessment of Cost Reductions (in percent) due to Local Design and Production
COMPONENTS REDUCED LOCAL TOTAL IP IN LOCAL TOTAL
LOGISTICS MANUFACTURING (EXISTING IP) DESIGN (LOCAL IP)
MIRRORS PARABOLIC 5 3 8 10–20 18–28
MIRRORS FLAT 3 3 6 — 6
TRACKING DEVICES 2–5 3 5–8 25–30 30–38
DRIVE MECHANISM
RECEIVER TUBE-PTC 2 3 5 20–25 25–30
HTF PUMPS 3 8–10 11–13 — 11–13
TURBINES 2 5–10 7–12 10–15 17–27
STRUCTURE-PTC 3 4–7 7–10 20–30 27–40
SOLAR STEAM 2 3–5 5–7 15–20 20-27
GENERATOR
— Not applicable
Cost reductions because of technological breakthroughs, higher volumes in domestic and International markets, and learning
curve gains would have effects over and above the figures shown here.
41 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
A significant cost reduction is expected from local manufacturing of tracking devices,
receiver tubes, parabolic mirrors, turbines, and structures (PTC). Developers would also
find local manufacturing very attractive because of value-added services, such as the
local presence of many O&M options, better procurement lead times, and trained local
work force.
Figure 6:
Cost Reduction Potential Due to Local Manufacturing for Components Considered for 100 MW
PTC Plant without Thermal Storage
Cost reduction potential considered for a 100 MW PT plant
800
700
600
500
Rs. Crores
400
300
200
100
0
Phase 1 Phase 2 Phase 3
Solar Steam Generator Steam Turbine Structures
Receiver Tubes Parabolic Miror Drive Mechanism & Tracking Devices
Source: AQUA MCG
The cumulative cost of the components illustrated above in 2011 is Rs. 723 crores, which is
estimated to be 45% of the total project cost. With local manufacturing, we see a net decrease
of Rs. 135 crores, a 19% decrease by Phase III and a decrease of Rs. 232 crores or 32% by
Phase III for the above components (Phase II and Phase III prices are at 2011 prices).
5.5 Potential Involvement with International Players
The following section explains the potential involvement of Indian manufacturing industry
with international players in the CSP market.
Expertise on CSP Technology
India currently lacks the necessary expertise and commercial scale experience for solar
thermal power plants. In the short term, it is expected that the majority of the developers
would depend on international players for their expertise. The following alliances for
obtaining overseas expertise are currently known:
g Reliance Power has partnered with Areva
42 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
g Lauren Engineers has partnered with Jyoti Structures Ltd., who are locally fabricating
the solar collectors of SBP design.
g Acme has entered into a licensing agreement with e-solar
g Dalmia Solar Power has decided to partner with Infinia
g Suryachakra Power Venture and Solar Millennium AG (SMAG), Germany, have formed
a JV
g Megha Engg has signed up with Albiasa Solar for local manufacturing of solar collectors
g BHEL has signed an MOU with Abengoa.
g Ingemetal of Spain has established a subsidiary in Pune for manufacture of solar
collectors.
Components Requiring Special Manufacturing Processes
With regard to critical components, such as receiver tubes or mirrors, indications from the
industry are that in the short term international players will import them (in the case of
PTR) or set up manufacturing facilities themselves (Saint-Gobain). It is highly unlikely that
international companies will give license to local players to manufacture technology-specific
components, such as receivers, given their concerns about IP protection.
Components with Modifications or Variations
As far as support structures are concerned, they will most likely be manufactured locally
with the required expertise to be provided by the international players. Jigs, fixtures, and
molds, for example, are expected to be different, but indigenously manufactured.
With respect to the turbines, it will take a while for local manufacturers, such as BHEL, to
adapt their technology to what is required for solar power plants. Most of the turbines are
likely to be imported for the Phase I of the JNNSM; however, local turbine manufacturers are
expected to be fully ready by Phase II to become suppliers for solar power plants by 2013–17.
Examples for governments providing incentives for local manufacturing of CSP components
have been provided in the box below.
Box 1:
Examples of Incentives for Local Manufacturing of CSP Components
The Spanish Association of the Solar Thermal Electricity Industry (PROTERMOSOLAR) claims that
between 75 percent and 80 percent of the components used in the Spanish CSP plants come from national
manufacturing or are developed with national technology. To reach this high level of domestic production,
Spanish industry benefited from subsidies enabling the development of manufacturing plants, with many
mechanisms to promote the development of innovative companies and focused on job creations, such as
national or regional or funds, for example, CDTI and CTA.
In Spain, subventions from the European Council were distributed to the Autonomous Communities
by the Technological Fund, giving priority to those regions that have low per capita income. Thus, from
the EUR 2,000 million received by the Spanish regional funds, more than 40 percent was directed to
Andalusia. The managing organism for most of the budget of the newly created regional agencies for
business strategy (mostly development project in consortium) is the Spanish Centre for Industrial
Technological Development (CDTI), in collaboration with local institutions.
43 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
The CDTI is a public entity funded by the Ministry of Science and Innovation whose mission is to promote
innovation and technological development of Spanish companies. It supports R&D projects by direct
subsidies and helps them access financial support from national and international third parties to improve
the technological level of the Spanish industry. In 2009, CDTI was supporting at least five R&D projects
for the CSP industry led by the main Spanish players of this sector.
At the regional level, private foundations, such as the CTA in Andalusia, promote collaborations between
scientific and productive sectors to answer to the local needs in terms of innovation and development by
subsidizing R&D projects and technology transfer. The CTA is currently supporting six R&D projects for
the CSP industry.
Successful examples of CSP manufacturing plants that have been built in Germany, Spain, and the United
States are shown in Table 31.
Table 31:
Successful Incentives for Local Manufacturing of CSP Components in Spain, Germany,
and the United States
PLANT RIOGLASS RIOGLASS RIOGLASS SCHOTT TOTAL
SOLAR I SOLAR II SOLAR INC (LOCAL IP)
Component PT mirrors PT receiver tubes
Country Spain Spain USA Spain Germany
Investment EUR 23 M EUR 11 M US$100 EUR 40 M EUR 15 M
million
Subsidies regional regional local reg. & nat. NA
funds EUR funds EUR subsidies funds EUR
8M 2.2 M 9M
Job creation 120 200 109 109
Production 1.3 M mirrors/yr NA 100 000 units/ NA
yr (400 MW
PT)
44 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
6.
Analysis of Potential Economic
Benefits from the Development of a
Local Manufacturing Base
The development of renewable energy sources is an important goal in its own right, for
the reasons listed earlier in this report. When solar energy begins to replace fossil fuels for
power generation in a nation or region that is a net importer of those fuels, there is an impact
on imports that depends on the market penetration of the new technologies, and this has
important consequences for the economy and for security. However, it cannot be assumed
that measures taken to further the development of CSP systems will, by themselves, spur
the growth of a domestic industry to meet the needs of that development. In some cases, if
the industry does not develop at the same rate as the expansion of the renewable source or
is incapable of competing in the global market in terms of costs of production or product
quality, the development is likely to depend on imports from low-cost producing countries.
This is already happening in industrial but high-cost countries, such as the United States,
where stimuli intended to support solar technologies have failed to strengthen domestic
industries due to competitive international markets. In some cases, and notably in the case
of PV systems, domestic manufacturers have been put out of business by competition from
cheaper imports. Free trade is supposed to make it possible for all nations to take advantage
of the competitiveness of each, but the ideal model fails to take into account market
imperfections. For CSP technologies, the highest contribution to the cost of power is the
capital cost of systems and subsystems. Therefore, decision makers should take reasonable
measures to further the development of an effective domestic manufacturing industry for
solar systems and subsystems, related to but in addition to any measures taken to expand
the market penetration of renewable energy. One set may assist entrepreneurs, investors,
and even the utility industry. Another is needed to promote domestic manufacturing
and competitiveness.
45 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
This section analyzes the local economic benefits resulting from industry development
in India using a dynamic economic model with market scenarios and reference plants
with assumptions regarding the local share of a CSP deployment and manufacturing of
components. The results are aggregated by average share of local manufacturing in India,
economic impact on GDP, and labor impact: job creation and foreign trade impact.
6.1 Description of Economic Model
The JNNSM plan and targets are being considered as a reference for this analysis, so the
maximum market size for CSP technologies will be 10 GW by 2022. The other 10 GW of
solar power production capacity would be based on PV technologies. The mechanism of a
reverse auction is applied to all the three phases of JNNSM.
Besides this, state-level incentives are being offered in Gujarat and Rajasthan. In Gujarat, the
market size is not specified, but the feed-in tariff (FIT) has been fixed for the next 25 years. In
this mechanism, the lowest tariff is obviously not achieved, but the future market uncertainty
is reduced considerably, which provides a good incentive for developers to setup CSP plants
in the state. However, for the purposes of this analysis, the JNNSM has been assumed to
be successful in the optimistic scenario. It is assumed here that the export markets will be
supplied only when the domestic demand is met and they are hence considered separately.
Considering the global trends in technology development, CR technology has also been
considered in combination with the current dominant PT technology. Three scenarios have
been considered for analysis in 2022 (see Appendix 8, as shown in Table 32).
Table 32:
Considered Scenarios for Installed Capacity in India and Export Market
INSTALLED CAPACITY EXPORT MARKET
SCENARIO
IN 2022 DEMAND IN 2022
Scenario A (pessimistic) 2,000 MW 0 MW
Scenario B (moderate) 6,000 MW 0 MW
Scenario C (JNNSM, optimistic) 10,000 MW 2,000 MW
Source: AQUA MCG
Assumptions: Scenario B=60% of Optimistic, Scenario A=20% of Optimistic, Export Demand=20% of Optimistic
In order to estimate the total economic impact, costing for a reference plant has been chosen
of 100 MW capacity and 8 hours of thermal storage. CR technology has been incorporated
because it is generally considered the more advanced and promising technology. However,
since there is only one CR plant being setup in India, which is of a small size (10 MW),
the cost estimates given for the 100 MW reference plant are approximate, based on similar
plants in other parts of the world and adapted to local prices.
Cost reductions in solar field components are primarily due to local manufacturing, and
lower customs, logistics, and labor costs. For other components, cost reductions because of
46 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
learning curves have been considered, taking into account the increase in market size and
the passage of time in years. In cases where the critical minimum market size is not reached,
only a percentage of cost reductions due to local manufacturing has been considered.
A total reduction of approximately 10 percent in component costs has been considered
because of learning curves by 2022 if volume growth of installed capacity materializes.
However, if the volume growth is small, these cost reductions are reduced to 3 percent.
6.2 Projected Share of Local Manufacturing
A share of local manufacturing has been showed separately for each of the PT and CR
technologies. In both technologies, electrical conversion, thermal storage, and EPC are
assumed to be manufactured or supplied locally except for molten salts. In solar collection
and thermal conversion, the specific solar technology components, such as mirrors, tracking
and drive mechanism (TADM), and receiver tubes, have been considered to be manufactured
in the country partially depending on the volumes projected in the respective scenarios. In
the first case (Scenario A), TADM and receiver tubes are considered to be imported because
of insufficient volumes. In the CR technology, components are simpler and hence easily
made locally. However, in scenario A and B, because of insufficient volumes, mirrors and
TADM will continue to be imported.
The results of this analysis are gathered in Figures 7 and 8.
Figure 7:
Share of Local Manufacturing in PT Technology
120%
100%
Share of Local Manufacturing
80%
60%
40%
20%
0%
Scenario A Scenario B Scenario C
Solar collection Thermal conversion Thermal storage
Electrical coversion Project management and EPC Total
Source: AQUA
47 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Figure 8:
Share of Local Manufacturing in CR Technology
120%
100%
Share of Local Manufacturing
80%
60%
40%
20%
0%
Scenario A Scenario B Scenario C
Solar collection Thermal conversion Thermal storage
Electrical coversion Project management and EPC Total
Source: AQUA
6.3 Direct and Indirect Economic Impact
Effects on direct and indirect economic values are calculated in absolute numbers for each
scenario. In addition to local manufacturing of components and construction of the plant,
O&M will also contribute to the economic impact of CSP plants. The economic impact is
strongly related to the market size of CSP.
Table 33:
Estimated Direct and Indirect Economic Impact (in Rs. Crores per Year) for Scenarios A, B, and C
SCENARIO ECONOMIC PHASE I PHASE II PHASE III LOCAL SHARE COST REDUCTION
IMPACT (2010–13) (2013–17) (2017–22) BY 2022 BY 2022
Direct 1,097 2,084 8,400
A 76% 13%
Indirect 437 1,020 4,168
Direct 3,233 6,114 24,132
B 83% 16%
Indirect 1,288 2,983 12,961
Direct 5,369 10,027 49,170
C 90% 20%
Indirect 2,370 5,434 28,725
Source: AQUA MCG
6.4 Labor Impact in Terms of Job Creation
The results of the labor impact assessment give the numbers of direct job creation during
CSP plant construction, as well as the indirect job creation in local manufacturing plants.
The workforce needed during construction and ongoing operations has been estimated for
the reference plant based on interactions with developers on the skills, resources, and staffing
required. A local factor that needs to be taken into consideration is the way labor is deployed
in India. In power plant construction, the core staff is limited and a large part of the work is
48 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
subcontracted and carried out by contract labor. It is also a fact that higher technology may
not be as extensively deployed as in some of the developed countries, since labor in India is
relatively cheaper and businesses very often prefer to deploy more staff rather than go in for
expensive technology.
Thus the O&M of the plant will also create long-term employment in the solar sector. Jobs in
construction and O&M will also have an impact on induced jobs in the region. The number
of indirect jobs for construction and O&M will increase other induced jobs. Thus, this will
lead to a cascading effect, which will lead to greater wealth and income when new services
and products for their private consumption are demanded. It is difficult to quantify the total
number of all induced and indirect jobs. It is assumed that the indirect jobs created because
of local manufacturing will increase proportionately with the extent of local manufacturing.
The results of job creation for each considered scenario are gathered in Table 34.
Table 34:
Jobs Created for Each of the Scenarios A, B, and C in India
LOCAL
CONSTRUCTION OPERATION
TYPE OF JOB MANUFACTURING
Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III
Managerial staff 33 75 400 30 67 360 17 37 200
A Skilled labor 83 187 1,000 75 169 900 33 75 400
Unskilled labor 665 1,500 8,000 600 1,350 7,200 67 150 800
Managerial staff 100 225 1,200 90 200 1,080 50 110 600
B Skilled labor 250 562 3,000 225 505 2,700 100 225 1,200
Unskilled labor 2,000 4,497 24,000 1,800 4,050 21,600 200 450 2,400
Managerial staff 167 375 2,000 150 338 1,800 83 190 1,000
C Skilled labor 417 938 5,000 375 845 4,500 165 375 2,000
Unskilled labor 3,333 7,500 40,000 3,000 6,750 36,000 333 750 4,000
Source: AQUA MCG
6.5 Impact of Foreign Trade
Foreign trade in terms of exports generated is estimated only for CSP specific components
related to solar fields and thermal conversion. It is assumed that there will be no additional
exports for the traditional power block, electrical conversion block, and EPC block
components because of growth in the solar thermal industry.
Consideration has also been given to the fact that some of the components will take time to
stabilize once manufacturing starts in India. Minimum market demand for manufacturing also
plays a factor because this will decide the time at which manufacturing will start in India. For
this reason, in scenarios A and B, exports are not considered because with two technologies,
sharing the market pie, the market demand is just sufficient for each technology to justify full-
fledged production of some components, but not enough for production to stabilize and start
exports. Exports have been considered primarily for the more stable PT technology.
Assuming growth in exports of from 400 MW per year in 2022 to 900 MW per year in 2030,
the export market is estimated to be about Rs 5,000 crores in 2022, Rs 8,000 crores in 2025,
and Rs 11,500 crores in 2030.
49 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Part III
Preparation of an Action
Plan to Stimulate Local CSP
Technologies in India
50 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
7.
Present Scenario and
Future Needs
There have been some cases where government intervention has been successful in furthering
the market penetration of CSP technologies. Spain is a notable example, where a government
policy has created what is probably the most mature solar thermal electricity generation
infrastructure in the world, promoting domestic manufacturing, the service industries, and
energy independence. In a certain way, however, there may be a negative side to even this
success story. Indeed, by implicitly neglecting to reward risk-taking and innovation, the
infrastructure might turn obsolete very fast.
Conversely, a policy based simply on rewarding the lowest bids may attract non-mature
players that may not be in a position to deliver what is expected. A policy that requires a
large domestic input in parts and systems where the domestic capacity to produce those
parts and systems is non-existent may unduly delay market penetration or may require ad
hoc adjustments to show early wins. A policy that completely shields investors from risk may
generate complacency and inefficiencies.
There are other ways in which government intervention may be ineffective. A policy
that requires a large domestic input in parts and systems where the domestic capacity to
produce them is non-existent may delay market penetration unduly. Timing is one of the
most common sources for failure. An immediate positive outcome may not be realistic if
it depends on an activity whose implementation may take years. Fortunately, in this case,
there are tools that may help, such as the so-called critical path method, a project modeling
technique extensively used for effective management of all forms of projects. Although this
model has not been adopted here formally, it has implicitly informed the recommendations
for the implementation of the actions along different stages.
51 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Any of these possibilities may slow rather than promote market penetration (Covell Hansen,
and Martin1996). Any time lost in the achievement of what is an urgent goal is time that we
all can ill afford. That is why the action plan of the Indian government and industries should
be carefully elaborated.
7.1 Current Situation
From the perspective of all the stakeholders, be it the government, the investor, the developer,
or the banks, the solar PV projects today are looking attractive because of low capex; low
risks; proven technology; simpler installation, operation and maintenance; faster gestation
time; not requiring highly skilled operators; not requiring large amount of water; not getting
affected much from cloud transients; and having a very low auxiliary power consumption.
However, as it was stressed earlier, the CSP advantage becomes more profound when the
load serving is needed during the morning and evening peak hours and, in the midterm
future, the baseload. The evaluated cost CSP would also be further reduced if the cost related
to maintaining the system reliability was incorporated into a solar project costs (for both
PV and CSP). From a utility of any entity that has to meet the RPO obligations at the lowest
possible cost, presently, the PV technology is clearly the technology of choice within the
for mid-day load service segment. In fact, some of the CSP project developers, specifically
those who had been developing projects of less than 20 MW capacity, have been exploring
the possibility of shifting to solar PV technology option, since the CSP technology was not
working out to be economically viable, especially at lower capacities. In case of Gujarat,
only one CSP developer of a 25 MW facility is still involved in the construction of the plant,
although the project has not made much progress.
One of the ways to reduce the cost difference between CSP and PV is through hybridization
of CSP plants, which will significantly improve their economic viability. In the medium
term, that storage option should be incorporated into the plant design to further reduce
CSP project costs.
7.2 Need to Support CSP Projects
In view of the above, the CSP projects need long-term support from the government to
keep the developers interested in the projects and the industry. It is critical that the CSP
development in India does not fall through the cracks. Amidst the success of solar PV
projects in India, the CSP technology also provides a compelling case for support by the
government because of the following reasons technological reasons:
g Firstly, the conversion of solar to steam is a relatively high-efficiency process (vs. the
conversion efficiency of PV), and this can effectively supplement the fossil fuels/renewable
fuel, such as biomass, thus contributing to overall energy security of the country
g Secondly, CSP technology is the only techno-economically viable technology at present
for a storage option that can enable solar energy to become dispatchable, dependable,
and for meeting the peak power shortages, as well as serve the base load
52 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
8.
Action Plan
The JNNSM has plans to increase the contribution of solar thermal power in the country’s
overall production of power significantly. Hence, going forward, this needs to prominently
feature in the country’s energy policy and energy planning for the next 10 years. Similarly,
the CSP industry associated with solar thermal energy is expected to also grow along with
the Solar Thermal Generation. Hence, CSP Industry growth needs to factor in the country’s
industrial growth plans.
A specific action plan for the government in India has been divided into four parts—policy
framework, low-cost financing, subsidies and incentives planning, and a mechanism for
promoting innovation and R&D. Specific action items under each government body are
provided in Table 35.
Besides all the actions mentioned in the above matrix, the solar policy based on JNNSM
guidelines needs to cover the following issues on a long-term basis under the responsibility
of the MNRE:
g R&D and innovation framework: Funding mechanism and government support for
R&D projects, and mechanisms for PPPs for R&D projects.
g Framework for demonstration plants: Objective of the plants. Parties involved and
responsible for results. Funding mechanism. Role of private sector. Knowledge sharing
mechanism. Recognition and awards.
g Framework for solar industrial parks: Objective of getting economies of scale from
large volumes in a single location. Guidelines for initiation, private sector involvement,
incentives, and infrastructure planning.
g Guidelines for states to setup solar policies: Norms to ensure consistency in policies of
center and states in terms of aspects like eligibility criteria, land acquisition, environmental
53 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
clearances, quality standards, performance standards, costs, and incentives, so that
there is a united action and more credibility for the industry. Mechanisms rewarding
production at peak time should be encouraged.
g Framework for synergies and sharing knowledge: Synergies in action, such as shared
institutions giving certifications and training. Knowledge-sharing mechanism, so that
there is a shared list of recognized, as well as failed technologies, equipment, companies,
and methodologies.
Table 35:
Key Responsibilities and Timelines for the Action Plan
For all these actions, the key responsibility should be attributed to the MNRE / SECI
SUPPORTIVE
SECTION ACTION PLAN Y1 Y2 Y3 Y4 Y5
RESPONSIBILITY
Year-wise allocation for CSP
MNRE
power projects
Long-term
Regulatory support and tariff
policy
mechanism for solar thermal MNRE & CERC
framework
hybrid projects
for CSP
development Renewable energy certificate
mechanism for solar thermal CERC
energy generation
Planning Adequate payment security
for payment mechanism using the coal cess MOF/MNRE
security funds
Enabling of low-cost financing
Low-cost
for CSP from banks and separate MOF
financing
exposure limits for CSP projects
CCD and zero excise duties
for materials and components
Financial MOF
used for manufacturing of solar
planning of systems
subsidies and
Fiscal incentives for sponsored
incentives
research and in house R&D MOF
expenditure
Development and maintenance
of a public repository of MNRE
knowledge
Mechanism Development of quality and
MNRE
for specification standards
promotion Establishment of a R&D
MNRE
of R&D and framework on a PPP basis
innovation Development of solar energy
MNRE
courses
Sponsored research projects in
MNRE
educational institutions
54 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
8.1 Long-Term Policy Framework from the Government
Given the present situation, the question is what the government’s stand would be with
respect to supporting the CSP projects. The government can go ahead with the same policy
of equal capacity allocation for both PV and CSP, which would imply a differential tariff
regime for the same energy source, or the government can stay technology agnostic and
leave the choice of technology to the developer and allocate capacities purely based on tariff
just as the choice between thin film and crystalline was left to the developers.
If the government has to allocate equal capacity for CSP technology in Phase II, there has to
be a compelling economic case for doing so. Question that needs to be answered are what
levels of bid prices can be achieved in CSP projects in the second phase, specifically in light
of the present level of reduction already achieved in Phase-I.
Given the present trend in solar PV prices, the government may well decide to leave the
choice of technology to the developers and invite a bid without any quota for solar thermal.
If that happens, the chances of any developer opting for solar thermal project are slim. The
downside of this decision is that the market will quickly be saturated, leaving no option for
further cost reductions and potential increases in utility operating costs (with potentially
new firm capacity additions) because of the need to back up a significant influx of
intermittent capacity.
In the immediate future, what is necessary is a support mechanism for enabling solar hybrid
projects. The support mechanism can either be via subsidy provided for the solar block or a
generic tariff recognizing solar thermal contribution or a renewable energy certificate (REC)
modality, giving credit for the solar thermal energy harvested. Once the steam generation
from solar is given due credit, the hybrid CST projects will find lots of favor from the large
number of biomass projects that are not able to operate at full capacity because of biomass
availability constraints. Augmentation with solar steam would lead to biomass conservation
by 23 percent. This would then give an impetus for CST projects. With some more decreases
in CST project costs through experience and localization, CST can also substitute for
imported coal, after which the CST projects will proliferate. The tariff from such a solar
thermal—biomass hybrid plant—comes out to be Rs 6.68 per unit. The tariff calculation for
this hybrid plant is provided in Appendix 5, Solar Hybrid Systems.
Once the CSP projects in hybrid mode becomes commonplace, storage solutions will also
develop in parallel. In case of storage solution, because of the supply of power during the
peak period, these projects will merit a higher tariff that can then sustain the CSP project
with storage option.
A hybrid CSP option or a storage option would enable use of domestically available steam
turbines as well and thus not only be cost competitive to that of PV power, but CSP power
will be dispatchable and dependable. In addition, the quality of power from the CSP plant
will be much better compared to that of the PV plant.
55 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
The major action needed from the government is clear policy guidelines concerning the CSP
projects. More clarity is needed regarding the following:
g The quantum of CSP projects that would be supported in Phase-II and Phase-III of the
national Solar Mission
g Whether the CSP projects would be limited to stand-alone CSP projects or also recognize
the hybrid projects.
g Generic tariff guidelines for solar biomass hybrid projects and CSP projects with storage.
On the REC mechanism, the government can recognize solar thermal technology and
update the REC certification mechanism to make steam production from solar energy
sources eligible for REC credits.
Another major area in which the government needs to address is an alternative to the
accelerated depreciation benefit that is expected to be removed with the direct tax code
being introduced. A possible option could be to adopt the 30 percent investment tax credit
policy prevailing in the United States. In fact, the Investment Tax Credit policy is much
better than the accelerated depreciation concept, since it is the end use that is important and
not the user. ITC policy similar to the U.S. policy will give a huge boost to the renewable
energy sector and specifically the solar sector.
Policies need to be detailed out at both central and state levels for elaborating on government
Intentions for the long term because the life of a solar plant is estimated to be approximately
25 years. Industry needs a long-term vision, as well as a clear indication of commitment and
expected benefits to induce them to make investments over such a long range of time.
8.2 Availability of Low-cost Financing
This section is about what the government needs to do in order to make available low-cost
financing for the CSP industry, which is essential because much of the energy cost is the
result of the interest on the initial capital cost of setting up the plant. Specific action items
under each government body are as shown in Table 36.
8.3 Financial Planning of Subsidies and Incentives
The government has plans to grow the CSP industry in a big way. However, the initial growth
is going to depend heavily on subsidy and tax incentives. Since the subsidies are going to
be large, it is very essential to plan for these in terms of arranging for the sources of funds.
It is also essential plan for tax incentives carefully, have a time-sound milestone-based exit
strategy for this public finance, so as to maximize the impetus for growth. Specific action
items are shown in Table 37.
56 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 36:
Action Plan on Low-cost Financing
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Enabling of low- MOF One factor that has come out of the workshops is that interest
cost financing rates are going to be critical in determining the cost of energy. This
for CSP from is especially relevant in India because of the high interest rates
banks prevailing in the country, whereas developers overseas do not face
this problem and enjoy low debt interest rates. Since there is no
operating fuel for the plant, the operational costs of a CSP plant are
very low and the entire cost of power is a result of the interest rate
on the capital investment involved.
In order to make CSP competitive, it is important that the
government ensures that low-cost financing is available to
developers and people setting up local manufacturing capabilities.
This can be done by facilitating banks and financial institutions to
make investments in CSP through the following:
g Supporting knowledge by updating banks on CSP industry
developments through SEC and CEA.
g Mandating a certain percentage of investments in CSP
technologies,
g Obviating the risk concerns of banks by giving certain CSP
technologies technical approvals and validity.
g Subsidizing interest rates by a certain amount, say, 1–2.
g Facilitating funding through International bodies, such as World
Bank, KFW, and ADB.
g Owning significant equity stake in the CSP plants and thus
sharing some of the risks associated with the project.
Low-interest rate IREDA Solar sector could have source to low-cost debt funds facilitated by
green loans the RBI, which could announce special lending rates for this sector
as a priority sector, with funds mainly sourced from international
bodies (ADB, KFW, IDA, and IBRD) and tax-free solar bonds.
Creation of DNI IMD This has already commenced and a number of monitoring stations
measurement have been set up.
centers across
India g MNRE needs to make it mandatory for all developers to share
their locally measured DNI data at their project sites.
57 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 37:
Action Plan on Financial Planning of Subsidies and Incentives
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Enabling of low- MOF Currently there is an exemption of CCD of 5 percent on items
cost financing imported for solar thermal and photovoltaic power generation
for CSP from projects. This is sufficient for developers of solar power projects
banks to avail themselves of the benefits, but it is not clear whether local
manufacturers in CSP industry importing raw materials (RMs)
and local components for supplying components to solar power
projects can obtain excise exemptions for their materials.
This needs to be extended as follows:
g CCD should extend for the above not only for the initial setting
up of the plant but for the maintenance requirements also for the
next 8 years.
g Quality and specification standards should be developed and
integrated with the subsidies
g For local solar thermal component manufacturers, CCD
should be applicable to imported components and RMs used
for manufacture of the CSP components. For example, for
manufacturing TADMs, some of the key high-cost components,
such as controllers and sensors would need to be imported in the
short and medium term. A lower CCD will result in lower overall
cost of CSP power.
g Help will have to be taken from CEA in making a list of RMs and
components where CCD benefit can be applied to right away.
g CCD needs to be effective only for the next 8 years which is the
approximate time required to develop local capabilities. This is
also the time required for ramping up of the local volumes as
per the JNNSM. This will give a cut-off date for overseas players
to setup local plants in the country in anticipation of the market
opportunity.
g CCD should be applicable even if the RMs or components are
not directly used for CSP component manufacturing, but other
goods manufacturing in other areas of the business for the
following reasons:
- There would be and indirect cross-subsidy for CSP as well
because of the lower costs of running the business.
- More companies will go for CSP component manufacturing
and thus increase volumes in order to take advantage of the
benefits.
- There will be less bureaucracy, less paper work, and faster
processing when cross-checking of RM utilization and RM
waste is avoided by the government.
- This will also require less time spent in dispute resolution.
58 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Favorable tax MOF Currently, there is an accelerated depreciation benefit of 80%
benefits for CSP of the capital costs for power developers for solar thermal and
developers and photovoltaic power generation projects for the first year. However,
manufacturers this benefit is likely to be discontinued with the direct tax code
policy being implemented. Should that happen, the Government of
India needs to evolve an alternate tax policy, such as the investment
credit policy in the United States. Additionally, similar benefits
may be extended to local manufacturers in CSP industry. . The
subsidies need to be extended to the CSP industry which includes
manufacturers of CSP components:
g tax holidays on all CSP power projects.
g Accelerated depreciation for all local CSP component manufacturers.
g tax holidays for service industries in the CSP industry, such as
those doing EPC, EPCM, business and technical consultancy,
and R&D as their only core business.
g Service tax exemption for services provided in the CSP Industry
for companies providing services to developers, as well as
vendors of CSP.
Fiscal incentives MOF It will help companies invest more in research activities that will
for sponsored improve long-term competitiveness of individual players in the
research and industry, at the same time improve the overall technological
in-house R&D maturity of the ecosystem and reduce overall investment, cost of
expenditures production, and maintenance.
List of CBEC For easier implementation, a list of all components and materials
components that need to have excise duty exemption and CCD needs to be
and services in prepared and maintained. This needs to be prepared and approved
CSP for excise by the CEA, the Technical Authority in consultation with the SEC
duty and CCD taking feedback from the Industry which is represented by FAST
exemptions for solar power.
Source funds MOF To stimulate public investment in infrastructure, the government
from the public and RBI have encouraged IFCI, IDFC, LIC, and NBFCs designated
at lower interest as infrastructure finance companies (IFCs) to issue government-
rates for CSP guaranteed tax saving and tax free long term infrastructure bonds
plants for providing long-term financial assistance to infrastructure
projects. The concessional financing provided for infrastructure
projects can be extended specifically to solar thermal plants.
g Tax-saving solar bonds over a horizon of several years that are
backed by the government and that have tax-free returns.
g For proven technologies (PT, CRS) where there are existing plants
in operation in the world, the government can provide backing
for financing of projects so that banks can lend funds at lower-
risk interest rates.
g Consequently, reverse auctions need to be setup with developers
in combination with the lowered rate of interest.
59 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Funds for CSP MOF Currently, there is an accelerated depreciation benefit of 80%
from the Clean Currently Rs 50 per ton is being levied as coal cess for the purpose
Energy Fund of funding the Clean Energy Fund. Since the purpose of this fund
is to sponsor research and invest in clean energy technology, a
part of this fund needs to be allocated for promoting technological
innovation in CSP and financing subsidies in CSP component
manufacturing setup. To avoid inappropriate use, allocation
needs to be done specifically for high-technology component
development and manufacture, which will reduce cost of power
and enable faster grid parity.
g Total of Rs 400 crores can be allocated specifically to TADM
technology development for PT, LF, and CR technologies.
g Total of Rs 400 crores can be allocated specifically to receiver
tubes technology development for PT and LF technologies,
g Total of Rs 100 crores can be allocated to specifically setup DNI
measurement centers across the country.
8.4 Mechanism for Promotion of R&D and Innovation
Government funds can be channelled into one of two areas—subsidies on tariffs or on R&D
to lower the tariffs. Subsidizing tariffs is a very costly proposition in the long term, since the
industry is expected to grow very large. This also tends to protect the industry and make it less
competitive. Promotion of R&D and Innovation has long-term benefits in terms of a reduced
cost structure and is also less expensive. This section is about possible action steps in having
a mechanism to promote R&D and innovation. Specific action items are shown in Table 38.
Table 38:
Action Plan for Promotion of R&D and Innovation
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Development SEC There needs to be a central Institution that maintains a repository
and maintenance of knowledge regarding solar energy. SEC is in a position to take
of a public up that role. Information that needs to be public domain is DNI
repository of data across various locations in the country, and technology-wise
knowledge costing models showing a relationship with various parameters,
such as mirror area, modularity, efficiencies.
Development CEA, the technical authority in the country on quality and
of quality and standards in power, needs to develop and establish quality and
specification specification standards for components. A separate division in
standards CEA can be setup for the Solar Block, which is the new factor in
the industry. These standards need to be setup with participation
from the industry, especially where there are issues relating to
standardization in design of various components.
60 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
SUPPORTIVE
ACTION PLAN DESCRIPTION
RESPONSIBILITY
Establishment CEA, SEC Investment in R&D is one of the key feedbacks from the workshop.
of an R&D Industry is also looking to the government in actively promoting
framework on a this. Hence, recommendation from the consortium in developing
PPP basis an R&D framework with government and industry participation
on the following lines of thought:
g Establish ‘Reform Champions’ within the ministries
g Establishment of a separate R&D setup as a public limited
company with private participation.
g The government would own a controlling stake with the rest
being auctioned to interested industry players. A minimum
ownership of the company would entitle the company to own
commercial license rights to the IP developed by the company,
and to have corresponding voting rights on the projects taken up
and the distribution of R&D funds.
g Company would have specific R&D objectives in order to achieve
which R&D projects should be taken up. Each project would
have resources required in terms of equipment and people,
projection of funds that would be required for the project year on
year, and time-based expected results in terms of IP produced.
g Specific sectors that require targeting by the government are the
development of TADMs, and the development of receiver tubes.
Development SEC, CEA, IIT SEC as a central Institution for promoting solar energy needs to
of solar energy Jodhpur take up the responsibility of developing course materials for a solar
courses for energy–related field of specialization. It can then specify guidelines
educational for developing courses for qualifications in CSP for graduate and
institutions post graduate levels for developing technical professional and
managerial talent.
Sponsored SEC, MOF, IREDA Specific research projects on CSP can be announced by the SEC for
research projects taking up by educational institutions. These can be sponsored by
in educational the government, which can be another source of getting R&D work
institutions done in solar energy. This could help to change the mindset of the
young, and to attract and recruit the best talent.
Fast-track SEC Specific research projects on solar thermal called technology
technology demonstration projects are already announced by the SEC for
demonstration taking up by private players. These need to be fast-tracked.
projects
Develop a SEC An institutional mechanism to promote networking and JVs is
mechanism needed. The government should start CSP workshops with specific
to promote agendas on component manufacturing for promoting collaboration
innovation among various players in the industry.
Based on the feedback received from the two workshops conducted, below is tabulated an
insight in what the industry expects from the government. It should be noted that this list
reflects the demand from the industry and is not the opinion of the World Bank.
61 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Box 2:
Expectations from the Government
Technology g Increased market size.
g Development of a body of knowledge to tailor the technology to Indian conditions.
g Funding of R&D projects in CSP in order to reap benefits of cost reduction by local
technology development.
g R&D framework, including the participation of the industry.
g Test lab for CSP components to ensure quality and specification standards in solar
component manufacturing.
g Standardization committee for CSP components.
g Benchmarking and calibration centers for CSP components involving private players.
g Institutional mechanism to promote networking and JVs.
g Acceleration of technology demonstration projects with stricter qualification criteria to
avoid unrealistic projects.
g Promotion of innovation and diversity of technology.
g Setting up reliable sources of DNI and making them accessible to the market.
Policies g Stable solar policy with clear guidelines for CSP to reduce variability in the financial
models of the developers and also create a more stable market for CSP.
g Clear land acquisition, water and environmental policies supportive of CSP projects.
g Clearer long-term RPO and REC policies extending up to 10 years. The floor price needs
to be fixed for these for the next 10 years.
g Aligned state and central government policies.
g Strengthened RPO enforcement considering penalties if not followed.
Incentives for g Incentive mechanisms for developers and manufacturers funded from the CESS collected
Financing from coal, as subsidies to reduce interest rates for CSP industry and the capital cost of
the projects to international borrowing rates.
g Availability of nonrecourse funding for CSP as for the wind energy sector.
g Lending enabled for a period of 15–20 years rather than 10 years.
g Implementation of futures market for interest rates.
Industry g Increased visibility for developers about the policy road map of the central government
Growth for Phase II and Phase III.
g Increased localization target to promote local manufacturing.
g Revision of the bidding mechanism to avoid usage of less efficient established
technologies compromising innovation and long-term success.
g Stricter bidding criteria for the selection of developers in Phase II, with qualification
requirements.
g Government-owned IP.
Human g Setup of education and certification programs for people to be trained in solar energy.
Resource g Promotion of institutes providing the requisite training and education for CSP industry.
Development
62 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
9.
Roadmap for Specific Industries
For all the specific industries mentioned in Table 39, the government needs to set up quality
specification standards as an action in the short term, and accelerated depreciation needs to
be provided for in the long term. This also has to be accompanied by tax holidays and zero
excise duties for components produced locally. A summary of the Industry specific actions
is shown in Table 39. For the other components considered to be currently available in the
Indian market, market growth should be promoted in order to reduce costs.
The action plan is further divided into short term, medium term, and long term. Short term
consists of actions that can be accomplished in the next six months. Medium term is what
can be accomplished from then on from seven months to two years. Short- and medium-
term actions are those that are associated with policies and planning. Long-term actions
are actions that are mainly execution oriented in nature and that need to be sustained over
several years from the third year onward.
Table 39:
Industry-Specific Actions to Promote CSP Technologies
Component Local Manufacturing
Recommended Actions
Ormaterial Capability
RECEIVER 1 Promote R&D in solar selective and anti-reflective coatings.
(PT) Promote R&D for metal glass seal.
Promote collaboration with global players.
RECEIVER 1 Promote R&D for receivers able to work under high solar flux.
(CR) Promote R&D for volumetric receivers using atmospheric air as HTF.
Promote R&D for durable pressurized air receivers.
MIRROR 2 Zero customs for low-iron sand.
(PT) Explore sources of low-iron sand.
Lower customs for bending equipment.
63 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
Local
Component
Manufacturing Recommended Actions
Ormaterial
Capability
MIRROR 3 Zero customs for low-iron sand.
(CR) Explore sources of low-iron sand.
DRIVE/ 2 Promote R&D for solar sensor and controller technology.
TRACKING (PT) Promote collaboration with global players.
DRIVE/ 1 Promote R&D for solar sensor and controller technology.
TRACKING (CR) Promote collaboration with global players.
HTF 2 Ores not present in India. Lower customs for oil and salts.
(OIL OR Promote research in materials having high heat density, stability,
MOLTEN SALTS) thermal conductivity, and latent heat.
Promote research in thermochemical and electrochemical storage.
TURBINES 3 Establish technical and quality standards for CSP turbines.
BALL JOINTS 4 Promote market growth for reducing cost.
HTF PUMPS/ 4 Promote market growth for reducing cost.
PIPING
SUPPORT 4 Promote market growth for reducing cost.
STRUCTURES/ Promote technology to reduce labor and the cost of
PYLONS manufacturing and assembly.
SOLAR STEAM 4 Promote market growth for reducing cost.
GENERATORS
9.1 Mirror Manufacturers
Figure 9:
Roadmap for Mirror Manufacturers
Current Status Short Term Mid-Term Overall Goal
Technology Development Bending & Production Facilities
Availability of Low Iron Tempering to
upgraded by Existing Players
produce curved float
sand is Concern to produce solar float glass Technology
glass & subsequent
mirroring would mostly
Parabolic Mirrors for CSTP Import of Low come through
not manufactured in India Iron flat float glass Locally manufactured solar JV/Licensing or
High Quality Parabolic mirrors for PTC, LF & CR compnay owned IP
Float Glass Production in
India dominated by MNC’s Mirrors sourced locally
Business Setup Source Bending & Tempering Partial
Equipments manufacturing in
Existing Float Glass Players –
Major Float Glass the short term
Incremental capex for production
manufacturers in India Existing Float Glass Players w/o of solar float glass mirrors Partial
have the know how for CSTO specfic IP-JV/Licensing manufacturing in
CSTP mirrors with international players the mid-term
Zero custom duties for import of Low Iron Tax Holidays and Zero Excise for Long Term Stable
Policy Framework and Flat Float Glass and Bending Equipments CSTP Components produced locally Policy Framework
Market Development Establishment of Quality and Specification Accelerated Depreciation for CSTP
CSTP Market Demand Standards Investments
uncertain, Current market Cost competitive
Geological Survey of India (GSI) to Zero custom duty for Low Iron
size is small manufacturing
explore and record sources of Low Iron sand imports for CSTP usage
sand (40ppm) within India
64 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
The main concerns for mirror manufacturing in India revolve around the certainty of
demand, availability of low-iron sand, and incremental capex costs of investments. Mirror
manufacturers need to start some production operations locally first by importing low-iron
float glass and then bending and tempering it locally to produce curved glass. This can then
be further processed in terms of mirroring.
Global players who have the technology can then upgrade their facilities to produce float
glass. Investment will be required in bending and tempering equipment and line upgrades.
For local players, the cost of licensing will also need to be factored in.
Government support of an action plan is required for the waiving of import duties and
customs on low-iron float glass and bending equipment in the short term. In the long term,
a waiver on the import of low-iron sand and customs is required.
9.2 Receiver Tube PTC Manufacturers
Figure 10:
Roadmap for Receiver Tube PTC Manufacturers
Current Status Mid Term Long-Term Overall Goal
Technology Development Ongoing Local R&D Local Expertise Production Facilities
Technical know how for expected to show expected to be set up
Solar Selective Coating and results by 2014 developed in the long
term either through Technology would
Anti Reflective Coating
R&D required by either R&D or JV/licensing mostly come
Technical Expertise for Govt. institutions or through compnay
Locally manufactured owned IP
metal glass seal Private Players Receiver Tubes
Business Setup
Leaading Players-Solel Greenfield investment by Develop market for industrial
(acquired by Siemens), International Players heat aplications in India Manufacturing the
Schott, Archimede Solar Quality R Tubes in
(from Angelatoni Group) JV/Collaboration with Icremental capex by the Long term
under license from ENEA, international players Local Players
Huiven
PPP for high technology CSTP Tax Holidays and Zero Excise for Long Term Stable
Policy Framework and component development CSTP Components produced locally Policy Framework
Market Development
Develope Technology Parks and Accelerated Depreciation for
CSTP Market Demand Regional Innovation Platforms CSTP investments
uncertain, Current market
size is small Cost competitive
Establishment of Quality and manufacturing
Specification Standards Accelerated Depreciation Tax credit on
for R&D capital assets R&D expenses
The main concerns for receiver tube manufacturing in India are the lack of technology and
know-how. The action plan is therefore tailored accordingly for promoting technology,
collaboration, and innovation.
Currently, there are no manufacturers of receiver tubes in India. Manufacturers in related
industries need to first complete R&D and experimentation for the solar selective coating
and antireflective coating. Simultaneously R&D work needs to start on the metal glass seal.
Global players who have the technology can collaborate with local players to enter the
Indian market. Alternatively, they can setup a greenfield venture in India. A better route,
65 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
however, will be to upgrade existing facilities in India—their own or a partner’s—and then
just provide the technical know-how. Players would then need to look at JVs and other
collaborative mechanisms to work jointly and share benefits.
Government support in terms of the action plan is required for promoting innovation and
R&D in terms of technology parks and regional innovation platforms. The government also
needs to come up with a format to develop technology using PPP models.
In the medium term and long term, tax credits on R&D expenses are required, and accelerated
depreciation on R&D capital assets is strongly recommended.
9.3 Tracking and Drive Mechanism (TADM) Manufacturers
Figure 11:
Roadmap for TADM Manufacturers
Current Status Mid-Term Long-Term Overall Goal
Technology Development Develop Local Capability to Production Facilities
Technical know how for manufacture. Import sensor set up
Hydraulic Power Jack & and controller
Technology would
Cylinder mostly come
R&D required to develop sensor
Technical Expertise for Locally manufactured through compnay
and controller by Govt. or Private
owned IP
sensors and controller Players for CSTP Tracking & Drive
Medchanism
Business Setup
All devices are currently JV/Collaboration with Incremental capex by
imported international players Local Players Manufacturing
possible only in
India has sevearal the Long term
potential players who can Greenfield investment by Develop market for industrial
manufacture these devices International Players heat aplications in India
PPP for high technology CSTP Tax Holidays and Zero Excise for Long Term Stable
Policy Framework and component development CSTP Components produced locally Policy Framework
Market Development
Develop Technology Parks and Accelerated Depreciation for
CSTP Market Demand Regional Innovation Plafforms CSTP Investments
uncertain, Current market Cost competitive
size is small Establishment of Quality and Accelerated Depreciation Tax credit on manufacturing
Specification Standards for R&D capital assets R&D expenses
The main concerns for TADM manufacturing in India are the lack of technology and know-
how. The action plan is therefore tailored accordingly to promote technology, collaboration,
and innovation.
Currently, there are no manufacturers of TADM components in India. Manufacturers in
related industries need to first complete R&D and experimentation for solar tracking devices,
which are currently being used in military applications, and come up with a component that
is accurate enough to be used for CSP applications. This technology gap should be overcome
easily, in particular for PT.
Global players who have the technology can collaborate with local players for entering the
Indian market. Alternatively, they can setup a greenfield venture in India. A better route,
however, would be to upgrade existing facilities in India—their own or a partner’s—and
then just provide the technical know-how. Players would then need to look at JVs and
other collaborative mechanisms to work jointly and share benefits. In this case, some of the
66 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
components, such as the hydraulic jack and cylinder, can be made locally. The sensor and
controller can be imported from overseas.
Government support of an action plan is required for promoting innovation and R&D in
technology parks and regional innovation platforms. The government also needs to come up
with a format to develop technology using PPP models.
In the medium and long term, tax credits on R&D expenses are required, as well as accelerated
depreciation on R&D capital assets.
9.4 HTF Manufacturers
Figure 12:
Roadmap for HTF Manufacturers
Current Status Mid-Term Long-Term Overall Goal
Technology Development
Production Facilities upgraded
Sulphonation & Blending by Existing Petrochemical
Technology
expertise is available locally Players to produce HTF would mostly
Import of high quality
Expertise required for Propylene Crude come through
JV/Licensing or
manufacturing CSTP
Locally manufactured HTF company owned IP
specific Synthetic Oil is
lacking locally (Synthetic Oil)
Business Setup
Ethylene Crude currently
being manufactured in India Existing Petrochemical Manufacturing
possible only in
Dow & Solutia the major Players form JV/
Greenfield investment by the Long term
players globally, do not Licensing with
have manufacturing setup International Players International Players
in India for CSTP specific
HTF
Policy Framework and Zero custom duties for import of Tax Holidays and Zero Excise for Long Term Stable
Market Development high purity Propylene Crude for CSTP CSTP Components produced locally Policy Framework
CSTP Market Demand
uncertain, Current market Establishment of Quality and Accelerated Depreciation for Cost competitive
size is small Specification Standards CSTP investments manufacturing
The main concerns for HTF manufacturing in India revolve around the certainty of demand
and the availability of raw materials (ethylene crude and propylene crude.)
HTF manufacturers need to first start production operations locally by importing high
quality propylene crude. The number of manufacturers of ethylene crude—the other
RM—in India is also limited. Then, existing facilities can be upgraded to produce HTF by
introducing the processes of sulphonation and blending.
Global players who have the technology can then upgrade their facilities to produce HTF.
Investment will be required will for equipment and line upgrades. For local players, the cost
of licensing will also need to be factored in.
Government support in terms of an action plan is required for waiving import duties and
customs on high quality propylene crude in the short term. Also, a waiver on the customs
duties for the sulphonation and blending equipment is required.
67 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
10.
Conclusions
The JNNSM Phase I catalyzed the growth of the solar sector in the country and contributed
to the reduction of prices offered by the project developers. To keep up this momentum and
to achieve further cost reductions for CSP technologies, the government needs to provide
clarity on the following:
g Capacity allocation for CSP sector
g Hybrid CST projects
g CSP projects with thermal storage, so that the industry is clear about the market size of
CSP in the next 10 years
CSP technologies incorporating thermal storage solution will make solar power dispatchable
and thus more cost effective to meet all segments of power demand. There is a realistic
potential for solar thermal technologies to make an important contribution to meeting
India’s capacity and energy demand and diversify the country generation profile.
There is also potential for the subcomponents of solar thermal systems to be manufactured
in India in the short, medium, and long terms. India has inherent competitive advantages
that will facilitate the transition to becoming a major provider of solar thermal technologies.
The factors that could contribute to this include highly trained engineering staff, low labor
costs, and a large domestic market. These are only a few aspects that can be leveraged by the
Indian industry to lower the capital costs for CSP plants, subsequently decreasing the LCOE
and driving the market penetration of solar thermal technologies.
68 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
To bring the solar plan to success, existing Indian industries have to identify and introduce
changes to participate significantly in supplying CSP components and systems. Many
traditional industries that could take an active part in CSP technology development have
been identified (automotive, glass, metal, power and process heat, machine tools and
robotics, technical supervising, electronics industry, oil and gas, and chemical industries).
Most of them only need a modest effort to adapt their products and manufacturing processes
to the demands of the CSP industry. Nonetheless, the competition between CSP players
will increase, enlarging the need for R&D activities to develop cheaper and more efficient
components. That is why research collaborations between private companies and research
laboratories are a key factor in developing the components and systems that will bring CSP
technologies to success.
Cost reductions are also expected from local manufacturing of tracking devices, receiver tubes,
parabolic mirrors, turbines, and structures (PT). Developers would find local manufacturing
very attractive also because of value-added services, such as the local presence of many O&M
options, better procurement lead time, and trained local workforce. The rapid reduction of
solar PV price has made it mandatory for solar thermal technologies to accelerate the cost
reduction process for their survival. Having achieved significant cost reductions in Phase I,
India has the potential to make the solar thermal technology competitive to solar PV. For
this, however, there must be a critical mass of investment, dedicated human resources, and
educational efforts, and criticality will be achieved when there is alignment of convergent
forces with national and regional policy and the right financial environment.
In the short term (within the next year), India’s readiness to manufacture or produce some
critical components, such as receiver tubes and mirrors, that make up solar thermal plants
is questionable, in spite of the huge manufacturing capacity of the country and the skills of
its labor force. In some cases, such as in the manufacture of reflecting surfaces, the lack of a
natural resource (in this case low-iron sand) poses an impediment to indigenization. In other
cases, such as in the manufacture of vacuum tubes, the obstacle to overcome is the lack of a
relevant technical know-how that is proprietary technology owned by others. Sometimes, in
a fast-growing economy, the high demand for some industrial products might lengthen the
delivery time for certain components.
Government, promoters and industry need to work together to ensure a viable path for
solar thermal technology development, creating a financial and regulatory environment that
supports investment in R&D, establishing financial and political incentives for sustainable
development and lowering the effective financial risks for investors while factoring in the
positive impacts on the environment, improvements in health, the natural habitat and
the quality of life that are associated with renewable energy in general and solar thermal
technologies in particular.
A review of what that cooperation entails has been presented in this report in terms of the
actions the governments need to take (through taxation, subsidies financing, special tariffs,
for example) and the steps industry must take if it is to become an important player in
69 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
developing market for CSP components. The key factors that will enable India to emerge as
competitive base for manufacturing CSP components are as follows:
g Supportive regulatory and fiscal environment to promote indigenization and technology
transfers, and create a favorable and viable business environment for all stakeholders
involved in CSP projects
g Favorable government policies to create market growth for all stakeholders of CSP
projects
g Development of CSP-related R&D capabilities in the country
g Availability of low-cost and adequate financing for CSP component manufacturers
Uncertainty in whatever form is a probably the greatest disincentive for domestic and
external investors and providers to make the commitments necessary to pave the way for
electrification based on renewable technologies. One of the forms that uncertainty takes
is about the scale of the domestic and global demand for subsystems and eliminating or at
least alleviating this risk depends on a clear road to commitment by governmental and
financial agencies.
70 Development of Local Supply Chain
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Part I V
Appendixes
71 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Appendix 1
CSP Technologies
In the following section, the four main concentrated solar power (CSP) technologies are
presented, giving an insight into the value chain of systems and components, and into the
commercial projects and pipeline.
A. Linear Fresnel Reflector Technology
General description
According to its developers and promoters, linear Fresnel reflector (LF) systems have lower
costs and are less sensitive to accidents than other alternatives by virtue of the off-the-shelf
components chosen for its construction and the use of low-curvature mirrors. Besides, they
make better use of the land than other technologies for the same power output.
However, LF systems work at low operating temperatures and low solar field efficiencies
and therefore they tend to be less efficient than other technologies. Furthermore, there is no
technically developed storage system available for LF systems.
Plant configurations in LF technology are similar to those for parabolic troughs. However,
low temperatures systems also offer better opportunities for implementation in innovative
cycles like organic Rankine cycles, solar preheating, integrated solar combined cycle systems,
and other low temperature applications, such as solar air conditioning systems.
The most common configuration of linear Fresnel plants is direct steam generation (DSG).
This innovative concept consists in using water/steam, not only as working fluid in the
power block, but also as heat transfer fluid in the solar field. It can be implemented in many
plants and in particular in strongly hybridized systems.
72 Development of Local Supply Chain
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Figure 13 :
Views of Linear Fresnel Reflector Arrays
Source: Morrison 2006
Plant and Components Value Chain
Table 40 shows the main stakeholders of the LF plants value chain. Having added in 2010
Ausra´s technology to its package of thermal system offerings to provide turnkey solutions,
Areva can be now considered a leader in this technology. However, the company does not
have any new plants under construction, whereas Novatec Biosol is now building its 30
MWe Puerto Errado II solar plant in Calasparra, Spain.
Table 40:
Linear Fresnel Reflector Value Chain
TECHNOLOGY PROVIDER & Areva, MENA Cleantech AG, Novatec Biosol
INTEGRATOR
PROJECT DEVELOPMENT Areva, MENA Cleantech AG, Novatec Biosol
EPC Solar Heat& Power, Areva, Prointec S.A.
OPERATION Macquarie Generation, Novatec Biosol
PROJECT OWNERSHIP Macquarie Generation, Novatec Biosol
Source: Emerging Energy Research 2010
Major LF technology promoters, such as Areva and Novatec Biosol, develop and manufacture
their own specific components with proprietary designs. Regarding mirror assemblies, LF
technologies have fewer customized requirements, allowing technology integrators to rely
on the more than 65 flat glass suppliers worldwide.
73 Development of Local Supply Chain
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B. Parabolic Trough Technology
General Description
Parabolic trough (PT) technology is the most mature concentrated solar thermal technology
today. Commercial PT plants have been operating satisfactorily for more than 20 years,
giving valuable information and providing opportunities for improvements in design, as
well as O&M. Thus, they have a leadership position in power generation among CSP plants.
Figure 14 :
Basic Scheme of a PT Power Plant
Solar Field
Solar Steam Turbine
Superheater
HTF
Heater Boiler
(optional)
(optional)
Condenser
Fuel
Thermal
Energy Fuel
Storage
Steam
(optional)
Generator
Solar
Preheater Low Pressure
Deaerator Preheater
Solar
Reheater
Expansion
Vessel
Source: Pitz-Paal, Dersch, and Milos 2005
PT solar fields are modular: they can be implemented at any capacity, providing great
versatility. Even so, the optimal capacity for current technology is estimated to be about
150–200 MWe.
PT technology is expected to compete with conventional thermal power plants in the
midterm.
Plant and Components Value Chain
Table 41 and Table 42 list the main stakeholders of the parabolic trough plants and components
value chain. These are players with a track record of built projects, that is to say, projects that
have been involved in at least one demonstration or commercial CSP installation.
74 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Figure 15:
Aerial View of Andasol Power Station
Source: Solar Millennium AG
Table 41:
Parabolic Trough Plant Value Chain, Playerswith a Track Record of Built Projects
TECHNOLOGY Flagsol, Solar Millennium, Siemens CSP Ltd., Solare XXI, ENEA, Abengoa Solar, Aries
PROVIDER & Solar Termoeléctrica, Ingemetal or SAMCA, Sener, Acciona Energía, Solel, Iberdrola,
INTEGRATOR SkyFuel
PROJECT Solar Millennium, ERM Power, Inner Mongolia Luneng New Energy, Suryachakra
DEVELOPMENT Power, Entegra Ltd., Enel, NEAL, World Bank, NREA, Abengoa, Total, Dioxipe Solar,
SAMCA, Flagsol, Sener, ACS Cobra, Acciona Energía, Fotowatio, NextEra Energy,
Iberdrola, Ibereólica, FCC, Abantia, Enerstar, Magtel, Epuron, Conergy, Siemens,
SkyFuel, Cogentrix Energy, NextEra, FPL
EPC Leighton Contractors Pty, Inner Mongolia Luneng New Energy, Techint, Orascom,
Ferrostaal, Abener, Teyma, Aries or Elecnor, GEA21, TSK Energía, Ferrostaal, Duro
Felguera S.A, ACS Cobra, Acciona Infraestructuras, OHL, Iberinco, Inveravante,
FCC, Técnicas Reunidas, Magtel, Abengoa Solar, Siemens, MAN Ferrostaal, Cogentrix
Energy, Iberdrola Renovables, Worley Parsons, Lauren
OPERATION ERM Power, Inner Mongolia Luneng New Energy, Suryachakra Power, Entegra Ltd.,
Sonatrach. Cofides, ONE, Egyptian Electric Authority (EEA), Abengoa, Total, Masdar,
Dioxipe Solar, Grupo SAMCA, Solar Millennium, Sener, Acciona Energía, Fotowatio,
NextEra Energy, Iberdrola, Ibereólica, FCC, Abantia, Enerstar, Magtel, Epuron,
Siemens, Solar Trust America, Chevron Energy Solutions, Cogentrix Energy, Worley
Parsons, NextEra, Lauren, FPL
PROJECT Inner Mongolia Luneng New Energy, Suryachakra Power, Entegra Ltd., Enel, Sonatrach.
OWNERSHIP Cofides, ONE, Egyptian Electric Authority (EEA), Abengoa, Total, Masdar, EON,
Hyperion, Dioxipe, ACS Cobra, Acciona Energía, Fotowatio, OHL, NextEra Energy,
Iberdrola, Ibereólica, Inveravante, FCC, Abantia, Enerstar, Magtel, Epuron, Solar Trust
America, Chevron Energy Solutions, Cogentrix Energy, NextEra, FPL, Acciona Energía
Source: Emerging Energy Research 2010; CENER
75 Development of Local Supply Chain
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Table 42:
Parabolic Trough Components Value Chain
HEAT TRANSFER FLUIDS Dow Chemical, Solutia, Radco
HEAT COLLECTION ELEMENT SOLEL, Schott, Enertol Santana, Archimede Solar
MIRROR ASSEMBLY Flabeg, Rioglass, Saint-Gobain, Guardian, Ronda Reflex, Glaston,
ReflecTech
SUPPORT STRUCTURE Acciona Power, Flabeg Solar, Abengoa Solar, Sener, Samca, Albiasa
Solar, ENEA, SkyFuel, Sopogy, Sapa
Source: Emerging Energy Research 2010; CENER
C. Power Tower Technology
General Description
A power tower system or central receiver system (CRS) uses mirrors called heliostats with
two-axis sun-tracking to focus concentrated solar radiation on a receiver at the top of a
tower. The receiver absorbs the concentrated radiation and transforms it into thermal energy
of a working fluid.
Figure 16:
Scheme of a Molten Salt Power Tower
POWER BLOCK
Molten salt system STEAM TURBINE GENERATOR
HP IP/LP
GENERATOR TURBINE TURBINE CONDENSER
RECEIVER
COLLECTOR FIELD
HP Reheat
1 Sunlight is Steam Steam
concentrated and
directed from a large
field of heliostats to MOLTEN SALT
a receivr on a tall LOOP Hot Salt 4 Molten salt is
tower pumped from
Superheater Reheater the hot salt tank
3
The heated through a steam
salt from the generator that
Receive receiver is Steam Gen./ creates steam,
Tower Evaporator which drives a
stored in the
hot salt tank steam turbine, Condensate
generating Tank
Feedwater Preheaters electricity
Cold Salt STEAM
GENERATION
HELIOSTATS
SYSTEM
2 Molten salt from the
cold salt tank is pumped 5
Cold salt at 525o F (288o
through the receiver C) flows back to the cold
where it is heated to THERMAL STORAGE SYSTEM salt tank
1050o F (566 oC)
Source: Solar Reserve
76 Development of Local Supply Chain
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An advantage of central power towers over most other concentrating solar power (CSP)
technologies is that the solar collection occurs at one receiver atop a central tower, so piping
is not required throughout the solar field.
Because of high radiation fluxes reached in the receiver, it is possible to work at very high
temperatures without significant thermal losses, which makes it possible to integrate this
module in more efficient thermodynamic cycles.
Plant and Components Value Chain
Table 43 and Table 44 show the main stakeholders of the power tower value chain. These are
players with a track record of built projects—that is to say, those that have been involved in
at least one demonstration or commercial CSP installation.
Table 43:
Power Tower Plant Value Chain
TECHNOLOGY PROVIDER Lloyd Energy Storage, Worley Parsons, Chinese Academy of Sciences
& INTEGRATOR or National High-Tech Research, eSolar, Penglai Electric, Acme Energy
Solutions, Millennium Energy Industries, Aora, Clean Energy Systems,
SolarReserve, Abengoa Solar, Sener, BrightSource Industries Israel,
United Technologies, Lockheed Martin
PROJECT DEVELOPMENT Penglai Electric, Acme Energy Solutions, Millennium Energy Industries,
Clean Energy Systems, Eskom, Abengoa Solar, Torresol Energy,
BrightSource, eSolar, NRG, SolarReserve
EPC SMEC, China Huadian Engineering, Abener, Sener, Amsa, Bechtel, Fluor
OPERATION China Shaanxi Yulin Huayang New Energy, Acme Energy Solutions,
Abengoa Solar, Torresol Energy, Bechtel, BrightSource
PROJECT OWNERSHIP China Shaanxi Yulin Huayang New Energy, Acme Energy Solutions,
Eskom, Abengoa Solar, EON, Sener or Masdar, Bright Source Energy,
NRG, US Renewables
Source: Emerging Energy Research 2010; CENER
Table 44:
Power Tower Components Value Chain
HELIOSTAT MIRROR Guardian, FLABEG, Saint Gobain
ASSEMBLY
HELIOSTAT METALLIC Art Precision, China Manufacturing, Inabensa
STRUCTURE
TOWER RECEIVER Abengoa Solar NT, Sener, Brightsource Energy, SolarReserve, Pratt &
Whitney, Babcock Power, Victory Energy, Babcock & Wilcox
TOWER CIVIL WORKS ALTAC
Source: Emerging Energy Research 2010; CENER
77 Development of Local Supply Chain
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D. Dish Engine Technology
General Description
The dish/engine is unique among CSP systems in that it uses mechanical energy rather than
a working fluid in order to produce electricity. Dish engine systems consist of a mirrored
dish that collects and concentrates sunlight onto a receiver mounted at the focal point of
the dish.
Figure 17:
SES SunCatcher Dish Stirling Design
Source: SES
Compared to the other CSP technologies, dish-engine systems have higher investment costs
and do not have the potential for effective thermal storage and hybridization solutions.
On the other hand, the Stirling engine technology has three major advantages over other
thermal steam technologies: water usage is limited to O&M activities (for example, mirror
washing), efficiencies as high as 30 percent have been attained (at Sandia Laboratories), and
its modularity allows for a range of system sizes, from cumulative several MW to hundreds
of MW. Indeed, unlike other CSP technologies, dish-engines do not need water for cooling,
and they do not need the proximity of grid connection.
Plant and Components Value Chain
Table 45 and Table 46 show the three main players of the dish engine plants value chain. Up
to now, they are only active in Spain and the United States (2).
78 Development of Local Supply Chain
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Table 45:
Dish Engine Solar Plant Value Chain
TECHNOLOGY PROVIDER Abengoa Solar, Stirling Energy Systems, Infinia
& INTEGRATOR
PROJECT DEVELOPMENT Abengoa Solar, Tessera Solar
EPC Abener, RMT Mortensen
OPERATION Abengoa Solar, Stirling Energy Systems
PROJECT OWNERSHIP Abengoa Solar, Stirling Energy Systems, NTR
Source: Emerging Energy Research 2010; CENER
Table 46:
Dish Engine Solar Components Value Chain
STIRLING ENGINE Guardian, FLABEG, Saint Gobain
DISH MIRROR ASSEMBLY Paneltec, Tower Automotive
DISH STRUCTURE Schuff Steel
Source: Emerging Energy Research 2010; CENER
E. Power Island
General Description
The power island is common to the first three solar thermal technologies explained in
this document (LF, PT, and CRS). The heat exchangers and fire protection system specific
to thermal oil are not included in the DSG technology. According to their functional
characteristics, components in the power island can be divided into the power block
(including every component which closes the thermodynamic cycle, operating at high
pressures and temperatures, and the balance of plant (BOP, including every auxiliary
additional element necessary to the correct operation of the power block).
Component Value Chain
Table 47:
Power Island Components Value Chain
STEAM TURBINE AND Siemens, Alstom, General Electric Co., Ormat Technologies, MAN Turbo
GENERATOR
HEAT EXCHANGERS Foster, Wheeler, GEA Group, Stork, SPIG, Atepisa, Talleres MAC, SPX Cooling
Technologies, B.A.C. (MOVISAF), Soljet (Thermax), Hamon (Esindus), Alfa
Laval, Graver, Holtec International, Mecet, Sedical, Viessmann
BOILERS GTS Energy, PolyComp, Standard Sky, Cerney, Teyvi, Aalborg Industries
ELECTRICAL Caterpillar, Koncar, Circutor, Ansaldo, Landis & Gyr, Schneider Electric
EQUIPMENTS
INSTRUMENTATION AND Honeywell, Campbell Scientific Spain, WIKA, Krohne, Emerson Electric,
CONTROL Meisa, ATC-Control, Endress+Hauser, Crespo y Blasco, Sirsa
PUMPS AND FILTERS Friatec, Emica, Ruhrpumpen GmbH, Imo Pump, Varisco, Sulzer,
Grundfos, Sterling, SPP Pumps, Weir, KSB, PFS Pumps, Hidrafilter
TANK AND PRESSURIZED Calprisa, Koch Heat, Cremasco, Talleres, Talleres Lombo
EQUIPMENTS
UTILITY SYSTEMS Oinse, Comin, Compair, Sugimat, Wedeco, Ondeo, Regasa, Praxair,
Eurowater, Aquafrisch, Cryonorm, Chart Ferox, Spirax Sarco, Adiquímica,
ProMinent, Pastech, Nalco, Idagua, Deisa, KEU
Source: Emerging Energy Research 2010; CENER
79 Development of Local Supply Chain
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F. Thermal Energy Storage System
General Description
The implementation of thermal energy storage (TES) in CSP plants is intended to reduce the
cost of electricity by increasing their capacity factor and their ability to meet peak demand
and thus to command a higher rate in markets with varying prices along the day.
Storage capabilities must be proven at a large scale before widespread adoption takes place.
This is the key factor that differentiates CSP from wind and PV technologies and that
must be delivered in the medium term for the CSP market to grow. With increasing
intermittent renewable alternatives added to the grid, TES technology is expected to play an
even greater role.
Components Value Chain
Table 48:
Components Value Chain for Thermal Energy Storage
TES INTEGRATOR Solar Millennium (Flagsol), ACS Cobra, Sener, SolarReserve, Solare XXI,
Entegra, Abengoa, Abener
TES SUPPLIER Bertrams Heatec, Friatec, GEA
TES INVESTIGATION Lloyd Energy Storage, Ibereólica
MOLTEN SALT PRODUCER Haifa Chemicals, Sociedad Quimica y Minera de Chile SA, Coastal Chemical
Source: Emerging Energy Research 2010; CENER
80 Development of Local Supply Chain
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Appendix 2.
Commercial Projects and
Pipeline Worldwide
Table 49 shows the total installed capacity worldwide up to now, including the main
promoters of these projects already in operation. The pipeline of each technology is
also shown.
Table 49:
Total Installed Capacity and Project Pipeline Worldwide
TECHNOLOGY MAIN PROMOTERS TOTAL CAPACITY PROJECT
WORLDWIDE PIPELINE
(MW) WORLDWIDE
(MW)
LINEAR AREVA, Solar Power Group, Man 11 367
FRESNEL Ferrostaal, Novatec Biosol
REFLECTOR
PARABOLIC Luz, ACCIONA, ACS, FPL, Abengoa, 1,172 3,905
TROUGH Solar Millennium, Iberdrola, ACS Cobra,
SAMCA
CENTRAL Abengoa, eSolar, Torresol, Alpine SunTower, 53 1,967
RECEIVER SolarReserve, BrightSource, NRG Energy
PARABOLIC Renovalia Energy, SES, Tessera, Infinia, 2.5 1,671
DISH Calico Solar, AES Solar
Source: CENER
81 Development of Local Supply Chain
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Appendix 3.
Overview of Cost Drivers in
Reference Global CSP Plants
The investment cost of a CSP plant varies with the capacity of the power block, thermal
storage, if any, and the size of the solar collector field, for example. In order to keep the analysis
within manageable limits, it is necessary to define a reference plant for each technology.
Once a reference plant is defined, the cost of the plant and of its different subsystems and
components can be assessed, as well as the performance indicators of the plant as whole and
of its different subsystems and components. Based on this information and on the assessment
of the operational costs of the plant, the yearly LCOE for the plant can be estimated for a
given yearly electricity production. In this appendix, cost and financial inputs correspond to
the state of the art CSP projects in Spain. The complete methodology of this cost analysis is
described in Appendix 6.
A. Reference Plants
Linear Fresnel Reflector Technology
The LFR power plant chosen as a reference is a 30 MW power plant with no storage system.
This Fresnel power plant has the general characteristics of the commercial Fresnel plant
being built by Novatec Biosol in Puerto Errado. The collector design considered is the so-
called NOVA-1, the plant having a total mirror aperture of 216,000 m2.
The thermodynamic cycle of the electrical conversion system is a Rankine cycle of saturated
steam at a working temperature of 270ºC and a pressure of 55 bar. The power block has a
total power output of 30 MW. This power, for operational reasons, is provided by two 15
MWe turbines instead of a 30 MW turbine.
82 Development of Local Supply Chain
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The total investment cost of the reference Fresnel power plant is US$149 million (Rs 662
crores), approximately. Figure 18 shows the cost breakdown by main functional subsystems
and general cost items.
Figure 18:
Overall Investment Cost Breakdown for Linear Fresnel Reflector Reference Power Plant
Project
management Solar collection
and EPC system
16% 26%
Electrical Thermal
conversion system conversion system
47% 10%
Thermal storage
system
1%
Source: CENER.
As it can be observed, contrary to what is the case in other CSP technologies, in this
technology the investment costs of the solar collection and thermal conversion systems are
relatively small in comparison with the rest of the investment costs of the plant.
The power block investment cost is higher than it could be expected for a 30 MW
power block because, as mentioned before, the plant uses two 15 MW turbines instead of a
30 MWe turbine.
Parabolic Trough Technology
The reference plant considered for a parabolic trough installation has an installed power of
50 MWe with a Rankine thermodynamic cycle of superheated steam. The heat transfer fluid
is synthetic oil, Therminol VP-1, and the power plant has a two-tank molten salt storage
system with 6h capacity. The 553,920 m2 solar field is composed of Eurotrough collectors
and Schott receiver tubes.
This case corresponds to typical parabolic trough designs accomplished in Spain, as it is the
case of Andasol solar thermal power plants.
The total investment cost of the reference parabolic trough power plant is US$452 million
(Rs 2,000 crores), approximately. Figure 19 shows the cost breakdown by main functional
subsystems and general cost items.
83 Development of Local Supply Chain
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Figure 19:
Overall Investment Cost Breakdown for Parabolic Trough Reference Power Plant,
with Storage (left) and without Storage (right)
Project
management Solar 15% 37%
and EPC collection
15% system
Electrical 38%
conversion system
21% Thermal
33% 15%
Thermal conversion
storage system system
11% 15%
Source: CENER
As it can be observed, subsystems directly related to specific solar components (solar
collection system and thermal conversion system) represent more than the half of the total
investment costs of the plant.
This cost breakdown can be compared with a parabolic trough power plant without storage
of the same power capacity. The total investment cost would drop to approximately US$286
million (Rs 1,260 crores), taking into account that this reduction is not only a consequence
of the exclusion of the thermal storage system but also the reduction of the solar field area.
Power Tower Technology
For the current case, a 17 MW reference power plant similar to Gemasolar with a 304,520
m2 solar field (2,648 heliostats of 115 m2) and a 15 hours thermal storage has been analyzed.
The total investment cost of the reference Power Tower plant is US$237 million (Rs 1,048
crores), approximately. Figure 20shows the cost breakdown by main functional subsystems
and general cost items.
Figure 20:
Overall Investment Cost Breakdown for Power Tower Reference Power Plant,
with Storage (left) and without Storage (right)
Project
management
and EPC Solar 14% 21%
14% collection
system
Electrical
37%
conversion system
21%
Thermal
Thermal 33% 32%
conversion
storage system system
3% 25%
Source: CENER
In this case, the solar collection system and the thermal conversion system represent more
than 60 percent of the investment costs of the solar power plant.
84 Development of Local Supply Chain
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It is also important to notice that the weight of the thermal storage system does not
include the costs of the storage medium, since this has been incorporated into the thermal
conversion system.
This cost breakdown can be compared with a power tower plant without storage of the same
power capacity and the same configuration. The estimated total investment cost would drop
to approximately US$154 million (Rs. 683 crores): this reduction is not only a consequence
of the exclusion of the thermal storage system, but also the reduction of the solar field area. It
is worth remarking that, for the reference power tower plant configuration, the exclusion of
the storage system would probably not be profitable. Electrical production increase produced
by the implementation of a 15-hour storage system makes its inclusion worthwhile.
Dish Engine Technology
For this cost analysis, we have considered a 10 MW thermal power plant consisting of 400
dish Stirling units based on the 25 kW SES design. The Stirling engine implemented is a
Stirling Kockums 4-95, with hydrogen as the working fluid.
The total investment cost of the reference dish Stirling power plant is US$84 million (Rs 373
crores), approximately. Figure 21shows the cost breakdown by main functional subsystems
and general cost items.
Figure 21:
Overall Investment Cost Breakdown for Dish Stirling Reference Power Plant
Project
Plant management
infrastructure and EPC
13% 1%
Solar
collection system
28%
Thermal and
electrical
conversion system
58%
Source: CENER.
The lack of more specific information on the investment costs for this CSP technology has
required the reorganization of the structure adopted for the cost analysis. For the current
document, only two subsystems are being analyzed: the solar collection system and the
combination of the thermal conversion system and the electrical conversion system.
B. Cost and Performance Evolution
The analysis of the efficiency evolution is related to the technology improvements expected in
the period being considered. As it is impossible to make accurate predictions of when these
85 Development of Local Supply Chain
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efficiency improvements are going to take place, only global efficiency increases expected by
2015 and by 2020 are being considered. These efficiency improvements have been assumed
to be linear through the years.
Linear Fresnel Reflector Technology
The overall investment cost of the reference plant is expected to experience a cost reduction
of between 8percent and 14 percent by 2020, for factors, such as mass production in mirror
assembly and support structure production and operational experience. Mirror assembly
cost is mainly influenced by mass production and new reflector materials. Support structure
savings comes mainly from mass production and material savings. Further reduction in
this area can be achieved by standardization, which is expected to show an effect in 2015.
Improvement in heat collection elements by a foreseeable technological breakthrough will
further help to reduce total costs. Apart from these technical improvements, operational
experience will lead to significant savings.
A global plant improvement of 3–5 percent is being expected by 2015, coming up to 13–20
percent by 2020. These figures are based on technological advances related to new designs in
support structures, improvements in mirror and receiver properties, collector and receiver
size increase, and slight progress in turbine efficiency.
The base case for the LCOE evolution has been calculated according to the actual investment
cost detailed in the previous sections and a reference plant production of 65 GWh/year as
an appropriate value for the reference plant operating in a location receiving about 2,050
kWh/m2year. In this base case the LCOE obtained for 2010 is approximately US$0.19/kWh
(8.3 Rs /kWh) (cost assumptions are provided in Chapter 2 in the section on Linear Fresnel
Reflector Technology), and the expected reductions are between 7 percent and 13 percent by
2015 and between 15 percent and 24 percent by 2020.
Parabolic Trough Technology
The overall investment cost is expected to experience a cost reduction between 11 percent
and 19 percent by 2020. These reductions are resulting from factors such as improvements
in mirror assembly, support structure, thermal storage and heat collection elements, and
operational experience. Mirror assembly is likely to benefit from new materials introduced
for the reflecting surface. Weight reduction and standardization has a great impact on the
support structure costs. A breakthrough in the thermal storage system toward a thermocline
tank, which is expected in the mid to long term, has the opportunity to result in a big savings
in this area. A possible increase in heat collection element size could lead to further cost
reduction. Apart from these technical improvements, operational experience also has great
influence on the overall investment costs.
A global plant improvement of 7–9 percent is being expected by 2015, coming up to 10–14
percent by 2020. These figures are based on technological advances related to new designs in
support structures, improvements in mirror and receivers’ properties, collector and receiver
size increases, and slight progresses in turbine efficiency.
The base case for the LCOE evolution has been calculated according to the actual investment
cost detailed in the previous sections and a production of 155 GWh/year as an appropriate
86 Development of Local Supply Chain
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value for the reference plant operating in a location receiving about 2050 kWh/m2•year. In
this base case, the LCOE obtained for 2010 is approximately US$0.23/kWh (10.1 Rs /kWh)
(cost assumptions and input data are provided in Chapter 2 in the section on Parabolic
Trough Technology),and reductions expected are between 11 percent and 18 percent by
2015 and between 15 percent and 24 percent by 2020.
Power Tower Technology
The overall investment cost is expected to experience a cost reduction between 21 percent
and 33 percent by 2020, because of cost improvements in mirror assembly, support structure,
and thermal storage, as well as operational experience. Mirror assembly benefits mainly
from new materials for the reflecting surface. Support structure costs are mainly influenced
by weight reduction and standardization. A breakthrough in the thermal storage system
toward a thermocline tank, which is expected for the mid to long term, will also lead to a
significant cost reduction. Apart from these technical improvements, further savings are
achieved by increasing operational experience.
Improvements of 4–6 percent and 5–8 percent are expected by 2015 and 2020, respectively.
These figures are based on technological advances related to new designs in support
structures, improvements in mirror and receivers’ properties, and larger collector and
receivers, as well as small improvements in turbine efficiency.
The base case for the LCOE evolution has been calculated according to the actual investment
cost detailed in the previous sections and a production of 90 GWh/year as an appropriated
value for the reference plant operating in a location receiving about 2,050 kWh/m2•year. In
this base case, the LCOE obtained for 2010 is approximately US$0.21/kWh (9.5 Rs /kWh)
(cost assumptions and input data are provided in Chapter 2 in the section on Power Tower
Technology),and expected reductions are between 20 percent and 30 percent by 2015 and
between 22 percent and 32 percent by 2020.
Dish Engine Technology
The overall investment cost is expected to experience a cost reduction between 39 percent
and 53 percent by 2020. The main factors for this are mass production in mirror assembly
and mass production and standardization for support structure. Apart from this, further
savings are achieved by increasing operational experience.
A global plant improvement of 0.5–6 percent is being expected by 2015 and an improvement
of 10–15 percent is expected by 2020. These figures are based on technological advances
related to new designs in support structures, improvements in mirror and receiver properties,
and collector and receiver size increase, as well as slight improvements in turbine efficiency.
The base case for the LCOE evolution has been calculated according to the actual investment
cost detailed in the previous sections and a production of 22 GWh/year as an appropriated
value for the reference plant operating in a location receiving about 2050 kWh/m2•year. In
this base case, the LCOE obtained for 2010 is approximately US$0.29/kWh (12.6 Rs /kWh)
(cost assumptions and input data are provided in Chapter 2 in the section on Dish Engine
Technology), and reductions expected are between 34 percent and 48 percent for 2015 and
between 39 percent and 52 percent for 2020.
87 Development of Local Supply Chain
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Appendix 4.
JNNSM and Regulatory Mechanism
A. Solar potential of India
Each year, the solar radiation incident on India is well over 4,500 PWh (Peta=1015). The
solar irradiation map of India is shown in Figure 22.
Figure 22:
Solar Irradiation Map of India Adapted from IMD
Source: MNRE.
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g Rajasthan, Gujarat, and Haryana receive the highest global solar radiation in India
g Jaisalmer, in Rajasthan, receives the maximum radiation at 6.27 kWh/m2 per day
g The average daily duration of bright sunshine in Jodhpur, Rajasthan, is 8.9 hours
g On average, the intensity of solar radiation received in India is 200 MW/km2
B. Current Solar Landscape
Given India’s potential to generate electricity through solar thermal systems, the Government
of India has initiated a plan with ambitious targets to generate solar power through its
Jawaharlal Nehru National Solar Mission (JNNSM). The mission envisions a capacity of
20,000 MW by the year 2022, of which 50 percent will be CSP. Phase I, up to year 2013, has
a target of 1,100 MW, Phase II is from year 2013 to 2017 and Phase III is from year 2017 to
2022, with a target of 22,000 MW.
Table 50:
JNNSM Targets
APPLICATION TARGET FOR PHASE I CUMULATIVE CUMULATIVE
SEGMENT (2010–13) TARGET FOR PHASE II TARGET FOR PHASE
(2013–17) III (2017–22)
GRID SOLAR 1,100 MW 4,000 MW 20,000 MW
OFF-GRID SOLAR 200 MW 1,000 MW 2,000 MW
SOLAR COLLECTORS 7 km 2
15 km 2
20 km2
The JNNSM provides for NTPC’s Vidyut Vyapar Nigam Ltd (NVVN) to be the designated
nodal agency for procuring the solar power by entering into a Power Purchase Agreement
(PPA) with solar power generation project developers who will be setting up solar projects
before March 2013 that are to be connected to the grid at a voltage level of 33 kV and above.
The central government has a quota of 15 percent of the power generating capacity of NTPC
(unallocated capacity) at its discretion to distribute it as it sees fit to meet the demands of
various states and regions. For each MW of installed capacity of solar power, for which a PPA
is signed by NVVN, the Ministry of Power (MOP) shall allocate to NVVN an equivalent
amount of MW capacity from the unallocated quota of NTPC coal-based stations (which is
relatively cheaper), and NVVN will supply this “bundled” power to the distribution utilities.
This “bundled power” would be sold to the distribution utilities at prices determined by the
Central Electricity Regulatory Commission (CERC).
The first phase of the JNNSM capacity allocation was auctioned (reverse) owing to a robust
response from the industry. The auction process had seen selection of a total of seven bidders
to build 479 MW power generation capacity, based on CSP in the first phase of the scheme.
NVVN is the nodal agency for implementing the first phase of the program. The ceiling price
was set at CERC declared tariff of 15.31 Rs /kWh. The discount offered by a potential bidder
to the CERC tariff is vital for evaluation of bids for allocation of projects under JNNSM.
As an outcome, Reliance Power (RPower), Lanco, and KVK Energy will develop 100 MW
capacity each while Megha Engineering, Godavari Power, and Corporate Ispat will build
solar plants of 50 MW each. A 20 MW CSP plant will be developed by Arum Renewables.
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Besides these seven bidders, three of the grid-connected solar power projects in India are
already at an advanced stage of development (Acme Tele Power Limited, Dalmia Solar
Power Limited, and Entegra Limited) and have migrated to the JNNSM under Phase I of
the MNRE.
C. Regulatory Framework
In the last six years, the following significant developments have led up to the current stage
of solar energy development:
g Renewable Portfolio Obligation (RPO) of the Electricity Act-2003
RPO places an obligation on electricity supply companies to produce or consume a
specified fraction of their electricity consumption from renewable energy sources. This
mandates the SERCs to promote and support renewable energy development. CERC has
tariff regulations (determination at state level) and generic RPO obligation for different
states depending on RE generation capability. The RPO requirement encourages private
players to focus on renewable energy in their long-term strategic plan. It is expected
to attract investments in this area by mandating RPO supported by suitable policy and
regulatory framework.
g Integrated Energy Policy and Energy Security, 2005
From a longer-term perspective, there is a need to maximally develop domestic supply
options, as well as the need to diversify energy sources, which makes renewables
important to India’s energy sector. Indeed, solar power could be an important player in
India’s attaining energy independence in the long term.
g National Action Plan on Climate Change (NAPCC), 2008
With the objective to achieve a sustainable development path that advances and
economic and environmental objectives, the NAPCC formulated the following eight
national missions:
– National Solar Mission (now called JNNSM)
– National Mission for Enhanced Energy Efficiency
– National Mission on Sustainable Habitat
– National Water Mission
– National Mission for Sustaining Himalayan Ecosystem
– National Mission for a Green India
– National Mission for Sustainable Agriculture
– National Mission for Strategic Knowledge for Climate Change
Although efforts have been on for developing solar potential for some time, the real thrust
came when the Government of India launched the Jawaharlal Nehru National Solar Mission
(JNNSM) in January 2010 as one of the eight national missions under the Prime Minister’s
National Action Plan on Climate Change (NAPCC) in 2008.
90 Development of Local Supply Chain
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Figure 23:
Key Government Bodies Involved in Solar and RE Development in India
Central
Government
Ministry of New and
Ministry of
Renewable Energy
Power(MOP)
(MNRE)
Solar Energy Centre Indian Renewable Central Electricity Central Electricity
(SEC) Energy Development Authority (CEA) Regulatory Commission
Agency (IREDA) (CERC)
Institution under Government Owned Technical Standards Authority on Electricity
MNRE for Technology Non Banking Financial Authority and Tariff Policies
Promotion Company (NBFC) for
Renewable Energy
Development
Photovoltaic Power CSTP Power Private Traditional Power
NTPC NHPC
Generation companies Generation companies Generation Companies
Developers under Developers under Government Owned
JNNSM JNNSM Power Plants
Private Power Trading
NVVN
Companies
Power Trading
Subsidiary of NTPC
Private Power
Distribution Companies
Power Grid
Government Owned
Distribution Company
Source: AQUA MCG
NAPCC has set the target of 5 percent renewable energy purchase for FY 2009–10 against the
current level of around 3.5 percent. Further, NAPCC envisages that this target will increase
by 1 percent for the next 10 years. This would mean NAPCC envisages renewable energy to
constitute approx 15 percent of the energy mix of India. This would require a quantum jump
in deployment of renewable energy across the country.
The RPO requirement stems from the need to encourage players to focus on renewable
energy in their long-term strategic plan. This will ensure that over a period of time India
attains energy security in a sustainable manner. It is expected to attract investments in this
area by mandating RPO supported by suitable policy and regulatory framework.
91 Development of Local Supply Chain
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Appendix 5.
Solar Hybrid Systems
A. Commercially Viable Technologies
From an environmental point of view, solar-only configurations like the ones mentioned
above are the best configurations, since only heat from the solar field is used to generate steam.
However, since no mature TES solutions are commercially available for DSG, hybridization
with a fossil fuel boiler placed in parallel to the solar field could be interesting to increase the
capacity factor of the plant. In Spain the range of hybridization is limited to 12–15 percent (a
fraction of the fossil fuel energy in the total thermal energy of the plant) by the legal framework,
and in the United States it can reach up to 25 percent. This design allows three operation
modes (solar, fossil, or hybrid) providing great levels of versatility and dispatchability.
Figure 24:
Saturated-Steam Hybrid Plant Configuration
Superheated Steam
2
3
4 1 - Solar Field
2 - Gas Furnace
3 - Turbine
4 - Air cooled Condenser
5 - Dearator/Feedwater Tank
6 - Feedwater Pump
Condensate 40 - 70oC
1
5
Feedwater 140 C
o 6
Source: Novatec Biosol
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Aside from the configuration shown in Figure 25, other hybrid design can be considered for
linear Fresnel CSP plants:
Conventional Rankine Cycle with Solar Preheating
This concept aims at adding a solar preheater to big fossil power plants in order to reduce
their fuel consumption and gas emissions. It has been demonstrated at Liddell Coal Power
Plant in New South Wales, Australia. The annual solar fraction (amount of solar energy in
the total thermal energy of the plant) is usually lower than 5 percent. However, solar energy
is converted to power with high efficiencies (Morin and others 2004), and the investment
cost is low, so it can be a relevant option to retrofit existing fossil fuel plants already in
operation and introduce CSP technologies to the market. No solar energy is lost during
start-up and shut-down periods.
Integrated Solar Combined Cycle Systems (ISCCSs)
These systems consist of integrating solar energy into a combined cycle power plant, as
shown in Figure 25. They have been primarily considered for PTCs, but the characteristics
of linear Fresnel collectors (low cost, low temperature, DSG) made them very relevant for
ISCCs. They can be very effective, in particular if stable and continuous power production
is needed. Solar thermal energy is delivered to the heat recovery steam generator (HRSG)
of the combined cycle; thus, the steam turbine receives higher heat input than in classical
combined cycles, resulting in higher efficiencies.
Figure 25:
Basic Scheme of an ISCCS
Option B - Low Pressure Solar Steam
Solar
Steam
Expansion Generator
Vessel Low
Pressure Steam Turbine
Fuel Feedwater Steam
Flue
Gas
Gas Turbine Condenser
Waste Heat
Recovery System
Option A - High Pressure Solar Steam
High
Pressure
Steam
Solar
Steam
Expansion
Generator
Vessel
Low Pressure
Feedwater Deaerator Preheater
Source: Novatec Biosol
Note: There are two options for solar heat integration, from low pressure or high pressure solar steam
93 Development of Local Supply Chain
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These systems benefit from the high efficiencies of combined cycles compared to Rankine
cycles: some studies assess annual fuel-to-power efficiencies of about 60 percent (Dersch
and others 2004; World Bank 2006; German Federal Ministry for Education, Science,
Research and Technology 1996). Besides, since the investment cost for gas turbines is lower
than for steam turbines, ISCCSs are more cost-effective than hybrid solar Rankine cycles. As
in conventional Rankine cycle with solar preheating, no solar energy is lost during start-up
and shut-down periods.
The design solar fraction is limited (lower than 15–20 percent (Dersch and others 2004)),
resulting in a very low annual fraction (about 6 percent in favorable irradiation conditions;
up to 12 percent a TES is included).
Although the operation of CSP plants is very similar to the operation of fossil fuel thermal
plants, many options can be considered to design a parabolic trough solar plant, depending on
the choice of the thermal cycle, working fluid, solar fraction determined by the hybridization
(if any), and on the strategic objective of the installation. Most of them have already been
described in Chapter 2 in the section on Linear Fresnel Reflector Technology.
Currently there are three ISCC solar projects in advanced construction: Hassi R’Mel
(Algeria), Ain Beni Mathar (Morocco), and Kuraymat (Egypt). All of them are expected to
be connected on the grid within the current year. They all include a 20 MW parabolic trough
solar thermal field that generates electricity combined with a natural gas boiler.
B. Case Studies of Hybrid Plants
The implementation of hybrid solar-fossil plants with PT solar fields could be interesting
in the current market. In this section a techno-economic study will be presented, which
estimates the LCOE of such plants for various hybridization options. All options will have a
solar field equal to the one of a 50 MWe solar-only PT plant with thermal oil as HTF, located
in Sevilla, and three cases are considered:
g Hybrid plant with 50 MW coal boiler and 50 MW steam turbine, corresponding to a 24
percent solar fraction in the annual power production,
g Hybrid plant with 100 MW coal boiler and 100 MW steam turbine, corresponding to a
12 percent solar fraction in the annual power production,
g Hybrid plant with 200 MW coal boiler and 200 MW steam turbine, corresponding to a
6 percent solar fraction in the annual power production,
In all cases, plants are aimed at base-load generation, with a 100 percent capacity factor.
Although plant shut-downs are needed for maintenance operations, in this study the plants
are assumed to operate the whole year long without stops, since the objective of this analysis
is purely comparative. No hybridization with gas has been considered.
The main characteristics of the solar field used in all hybrid cases are shown in Table 51.
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Table 51:
Main Characteristics for the Parabolic Trough Field Implemented in a Hybrid Plant
SOLAR FIELD AND COLLECTOR PROPERTIES
Aperture area 249,264 m2
Number of loops 72
Collectors per loop 4
Collector width 5.76 m
Collector length 150 m
Results obtained for the different cases purposed are shown in the following sections.
Case 1:
Power Output 50MW with 24 percent Solar Fraction
The total investment cost of the Case 1 hybrid power plant is US$305 million (Rs 1346
crores), approximately. Table 52 shows the main characteristics considered and the main
simulation results obtained.
5.4 Expected Cost Reduction
Interactions with players in the CSP field have resulted in the assessment of expected cost
reductions summarized in Table 30.
Table 52:
Main Characteristics and Simulation Results for the Case 1
MAIN CHARACTERISICS SIMULATION RESULTS
Turbine nominal power MWe 50 Annual production MWhe/year 438,000
Boiler power MWth 135.5 Cycle efficiency % 41
Boiler efficiency % 90 Total thermal energy MWhth/year 1,068,355
Coal cost* US$/MWhth 10.7 Boiler thermal energy MWhth/year 811,000
Yearly solar fraction % 24 Solar Field thermal energy MWhth/year 257,355
*Source: EURACOAL
According to the following results obtained and the economics data, the LCOE obtained for
the Case 1 hybrid power plant is US$0.092/kWh.
Case 2:
Power Output 100 MW with 12% Solar Fraction
The total investment cost of the Case 2 hybrid power plant is US$443 M (Rs. 1959 crores),
approximately. Table 53 shows the main characteristics considered and the main simulation
results obtained.
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Table 53:
Main Characteristics and Simulation Results for the Case 2
MAIN CHARACTERISTICS SIMULATION RESULTS
Turbine nominal power MWe 100 Annual production MWhe/year 876,000
Boiler power MWth 264.5 Cycle efficiency % 42
Boiler efficiency % 90 Total thermal energy MWhth/year 2,085,355
Coal cost* US$/MWhth 10.7 Boiler thermal energy MWhth/year 1,828,000
Yearly solar fraction % 12 Solar Field thermal energy MWhth/year 257,355
*Source: EURACOAL
According to the following results obtained and the economics data, the LCOE obtained for
the Case 2 hybrid power plant is US$0.073/kWh.
Case 3:
Power Output 200MW with 6% Solar Fraction
The total investment cost of the Case 3 hybrid power plant is US$705 million (Rs. 3,116
crores), approximately. Table 54 shows the main characteristics considered and the main
simulation results obtained.
Table 54:
Main Characteristics and Simulation Results for the Case 3
MAIN CHARACTERISTICS SIMULATION RESULTS
Turbine nominal power MWe 200 Annual production MWhe/year 1,752,000
Boiler power MWth 516.8 Cycle efficiency % 43
Boiler efficiency % 90 Total thermal energy MWhth/year 4,074,355
Coal cost* US$/MWhth 10.7 Boiler thermal energy MWhth/year 3,817,000
Yearly solar fraction % 6 Solar Field thermal energy MWhth/year 257,355
*Source: EURACOAL
According to the following results obtained and the economics data, the LCOE obtained for
the Case 3 hybrid power plant is US$0.061/kWh.
C. Tariff Calculations for a Solar Thermal—Biomass Hybrid Plant
Considering the project of Rs. 14 crores/MW (Rs. 12 crores/MW for solar block + Rs. 1.5
crores/MW for the biomass boiler and fuel handling and ash handling systems+ Rs. 0.5 cr/
MW for misc) for a solar thermal biomass hybrid plant, the tariff from such a plant works out
to be Rs 6.68/KWh based on a plant CUF of 80 percent with solar contribution at 23 percent
(as per CERC norms). The assumptions are tabulated in Table 55.
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Table 55:
Financial Calculations for a CSP-Biomass Hybrid Plant
S. ASSUMPTION HEAD SUBHEAD SUBHEAD (2) UNIT PARAMETER
NO. VALUES
1 Power generation Capacity Installed power MW 1
generation capacity
Capacity utilization % 80%
factor
2 Project cost Capital cost/ Normative capital cost Rs lakhs/MW 1,400.00
MW Capital cost Rs lakhs 1,400.00
Capital subsidy Rs lakhs -
Net capital cost Rs lakhs 1,400.00
3 Financial assumptions Debt:equity Tariff period Years 25
Debt % 70%
Equity % 30%
Total debt amount Rs lakhs 980.00
Total equity amount Rs Lac lakhs 420.00
Debt Loan amount Rs lakhs 980.00
component Moratorium period Years 1.5
Repayment Years 11.5
period (including
moratorium)
Interest rate % 13.39%
Equity Equity amount Rs lakhs 420.00
Component Return on equity for % pa 19.00%
first 10 years
Return on equity 11th % pa 24%
year onwards
Discount rate % 22.00%
Depreciation Depreciation rate for % 7%
first 10 years
Depreciation rate 11th % 1.33%
year onwards
Incentives Generation based Rs lakhs pa 0
incentives
Period for GBI Years NA
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Cont...
S. ASSUMPTION HEAD SUBHEAD SUBHEAD (2) UNIT PARAMETER
NO. VALUES
4 O&M Normative Rs lakhs/MW 13.74
O&M expense
O&M expense Rs lakhs 13.74
per annum
Escalation % 5.72%
factor for
O&M expense
Biomass 150
expense
(variable cost
of
biomass @ Rs
3/KWh)
5 Working O&M expense Months 1
capital Maintenance (of O&M) % 15%
spares
Receivables Months 2
Interest on % pa 12.89%
working
capital
6 Starting and stopping Power for % 0.00%
power starting &
(of gross generation)
stopping of
plant
Power cost Rs /kWh 0
from grid
WACC 15.97%
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Appendix 6.
Cost Analysis Approach
This appendix includes the full methodology of the cost analysis approach carried out in the
present report.
A. Outline
The investment cost of a CSP plant varies with the power of the conventional power block
(for example, steam turbine or Stirling motor), the capacity of the thermal storage, if any,
and the size of the solar collector field. In order to keep the analysis within manageable
limits, it is necessary to define a reference plant for each technology.
Once a reference plant is defined, the cost of the plant and its different subsystems and
components can be assessed, as well as the performance indicators of the plant as whole and
its different subsystems and components. Based on this information, and on the assessment
of the operational costs of the plant, the yearly LCOE for the plant can be estimated for a
given yearly electricity production.
What is left is to determine, year by year from the starting to the final year of the cost analysis
period, the reductions in cost that the different components and subsystems of the plant
will experience, as well as the improvements in the performance indicators that could be
expected. This information can then be used to determine, for each one of the four CSP
technologies, the expected evolution of the LCOE as a function of time for the period
analyzed within the study: 2010–20.
With the outlined scheme, the price paid to be able to provide a quantitative analysis of the
expected LCOE evolution of the different CSP technologies is particularized. The evolution
99 Development of Local Supply Chain
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of the LCOE for each commercially available CSP technology is quantified just for a specific
reference plant, whose configuration is fixed over the period of analysis, and just for a specific
location, which is indirectly specified by assessing the amount of electricity the reference
plant will produce.
In the next sections, the details of the approach just outlined are further explained, and the
results obtained are presented for each one of the four CSP technologies considered.
B. Limitations and Boundary Conditions
Excluded Costs
Because of their strong dependency on the location of the power plant, their relatively CSP
technology independence, and the difficulty to make sensible generalizations about them,
the following costs are not included in the cost analysis:
g Costs associated with the connection to the electricity grid.
g Costs associated to the purchasing or renting of the land where the CSP plant will be
built
g Costs of water.
The first cost is strongly dependent on the specificities of the electricity grid in the area in
which the CSP plant is located, and on the particular electricity regulations and policies of
the country or region, while the second varies widely from country to country, and within a
country from place to place.
Quality and Availability of Cost Data
As stated in the introduction, the commercial deployment of CSP technologies is at a
very early stage and is not taking place at the same pace for all technologies. The only two
technologies that are clearly past the demonstration stage are parabolic trough and tower.
This has a substantial impact in the quantity and quality of the costs data available for
each technology.
Table 56 presents a gross and overall estimate of the uncertainty that can be associated to
the cost data available for each technology. As shown in the table, the uncertainties of the
cost data for all technologies are rather large. This is only because of the small number of
commercial CSP plants in operation, but also because of difficulties in obtaining the data
from industry, and by the large statistical dispersion of that data.
Table 56:
Overall Estimate of the Uncertainty Associated to the Costs Data by Technology
TECHNOLOGY LF PT CR PD
COSTS DATA >30% 15% 20% >30%
UNCERTAINTY
Source: CENER.
100 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
The large uncertainty associated with the cost data of the different CSP technologies is
further complicated by the fact that for some technologies, such as towers and dishes, the
current status of the technologies may not be representative of their mid-term evolution.
C. Investment Cost Evolution
The two drivers considered in the cost evolution model are as follows:
g Experience.
g Technology breakthroughs.
Experience is modeled by experience curves. These curves express how costs are expected
to decrease as a function of the experience the industry gains in the use of the technology
over the years. The parameter used to quantify experience is the cumulative installed power
capacity of CSP plants of a given technology. The mathematical expression of an experience
curve is the following:
P2
C2 log 2
R · P1
=P
C1
Where
g C1 is the cost of the product at the reference time,
g C2 is the cost of the product at the future instant for which it has to be assessed,
g P is the accumulated experience until the reference time,
1
g P is the accumulated experience until the future instant for which the cost has to be
2
assessed,
g PR is the progress ratio, which is the cost reduction that is expected each time that the
amount of the product is duplicated.
The indicator chosen to account for the experience is the installed capacity for each technology.
It has to be noted that the experience has to be estimated on a worldwide basis. The expected
evolution of the installed capacity worldwide for the four main CSP technologies is shown
in Figure 26. The progress ratio is chosen specifically for each subsystem (solar collection,
thermal conversion, electrical conversion, and thermal storage) of each reference plant.
For each CSP technology, breakthroughs are expected to be achieved at some points in the
future for key technology components. They are assumed to significantly lower the cost of
their corresponding component, or to improve the component’s efficiency, or both. These
breakthroughs are expected to be obtained from R&D activities carried out at present.
The date estimated of this evolution is in accordance to the results currently obtained and
reported. To simplify the model, these breakthroughs are divided into two groups: the ones
that will occur between 2011 and 2015, and the ones that will occur between 2015 and 2020.
In some cases, a certain cost reduction is expected as a consequence of a specific behavior
of the market. In these cases, the expected cost reduction substitutes the experience curve,
since it is expected to have a larger impact on the final cost reduction.
101 Development of Local Supply Chain
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Figure 26:
Expected Evolution of Installed Capacity Worldwide for Four CSP Technologies, 2010–20
2000
1800
1600
Potencia Instalada MW
1400
1200
1000
800
600
400
200
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ańo
Fresnel Desco-Stirling Torre Cilindro-parabolico
D. Cost Evolution Scenarios
The way of representing the cost evolution related to each component has been carried
out by ranges of percentage showing a sector of cost reduction probability going from a
conservative estimation, which excludes some optimistic breakthroughs, to the most
optimistic scenario, including every breakthrough foreseen, as well as the highest reduction
percentages estimated. Indeed, two scenarios have been considered for the cost evolution:
g In the conservative scenario, for each reference plant, the LCOE is calculated using the
minimum value within the variation range of the estimated yield, and the maximum
value within the variation range of the estimated costs. Besides, only the most probable
breakthroughs are included and conservative values of the progress ratio are considered
to determine the experience curves.
g In the optimistic scenario, for each reference plant, the LCOE is calculated using the
maximum value within the variation range of the estimated yield, and the minimum
value within the variation range of the estimated costs. Besides, most of the possible
breakthroughs are included and optimistic values of the progress ratio are considered to
determine the experience curves.
E. Financial Analysis
The LCOE is calculated for the four reference plants. This economic indicator can be defined
as the value, in current currency, that would have to be assigned to each unit of energy
produced by power plant during a given period to equal the total costs incurred during
this period, also expressed in current currency. The economic model developed for the
calculation of the LCOE is as follows.
102 Development of Local Supply Chain
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ĚĨŽƌƚŚĞĐĂůĐƵůĂƚŝŽŶŽĨƚŚĞ>KŝƐĂƐĨŽůůŽǁƐ͘
ƌŐǇ ƉƌŽĚƵĐĞĚ ďǇ ƚŚĞ ƉůĂŶƚ ĚƵƌŝŶŐ ǇĞĂƌ Ŷ͕ Ě ŝƐ ƚŚĞ ĚŝƐĐŽƵŶƚ ƌĂƚĞ͕ Ŷ ŝƐ ƚŚĞ ƚŽƚĂů ŽĨ
If Q is the amount of energy produced by the plant during year n, d is the discount rate, C
n
ĚƵƌŝŶŐǇĞĂƌŶ͕ƚŚĞ>KĐĂŶďĞĚĞƚĞƌŵŝŶĞĚƚŚĂŶŬƐƚŽƚŚĞĨŽůůŽǁŝŶŐĞǆƉƌĞƐƐŝŽŶ͘ n
is the total of incurred costs in the plant during year n, the LCOE can be determined thanks
to the following expression.
୬
σ୒
୬ୀଵ
ሺͳ ൅ ሻ୬
ൌ
୒ ୬
σ୬ୀଵ
ሺͳ ൅ ሻ୬
N is the number of years covered by the analysis, typically equivalent to the project or
ĐŽǀĞƌĞĚ ďǇ ƚŚĞ investment
ĂŶĂůǇƐŝƐ͕life. Cn includes
ƚǇƉŝĐĂůůǇ the investment
ĞƋƵŝǀĂůĞŶƚ costs
ƚŽ ƚŚĞ during the
ƉƌŽũĞĐƚ Žƌinitial years of construction
ŝŶǀĞƐƚŵĞŶƚ ůŝĨĞ͘ Ŷ
and commissioning of the plant, O&M costs, land costs, and financial costs, including
ŽƐƚƐ ĚƵƌŝŶŐ ƚŚĞ amortization
ŝŶŝƚŝĂů ǇĞĂƌƐand interest
ŽĨ payment. The
ĐŽŶƐƚƌƵĐƚŝŽŶ ĂŶĚdiscount rate indicatesŽĨ
ĐŽŵŵŝƐƐŝŽŶŝŶŐ the present
ƚŚĞ value
ƉůĂŶƚ͕ of future
KΘD
cash flows and depends, among other parameters, on the interest rates, inflation rates, and
expected profitability of the investment.
ĐŝĂůĐŽƐƚƐ͕ŝŶĐůƵĚŝŶŐĂŵŽƌƚŝǌĂƚŝŽŶĂŶĚŝŶƚĞƌĞƐƚƉĂǇŵĞŶƚ͘dŚĞĚŝƐĐŽƵŶƚƌĂƚĞŝŶĚŝĐĂƚĞƐ
ĐĂƐŚĨůŽǁƐĂŶĚĚĞƉĞŶĚƐ͕ĂŵŽŶŐŽƚŚĞƌƉĂƌĂŵĞƚĞƌƐ͕ŽŶƚŚĞŝŶƚĞƌĞƐƚƌĂƚĞƐ͕ŝŶĨůĂƚŝŽŶ
Since a discount rate is chosen for the discount rate is the weighted average cost of capital
(WACC) needed to finance the construction of the plant. Such a cost is calculated as the
ďŝůŝƚǇŽĨƚŚĞŝŶǀĞƐƚŵĞŶƚ͘
weighted average of the cost of the debt and of the equity’s expected profitability.
The annual costs of the plant include initial investment and all operating costs that have to be
incurred to ensure the correct operation of the installation, such as O&M costs and financial
ƐĞŶĨŽƌƚŚĞĚŝƐĐŽƵŶƚƌĂƚĞŝƐƚŚĞǁĞŝŐŚƚĞĚĂǀĞƌĂŐĞĐŽƐƚŽĨĐĂƉŝƚĂů;tͿŶĞĞĚĞĚƚŽ
costs. The amount of these total annual costs, since the relative weight of the specific costs
that compose it varies over the course of the years. Investment costs, O&M costs, and annual
ƚŚĞƉůĂŶƚ͘^ƵĐŚĂĐŽƐƚŝƐĐĂůĐƵůĂƚĞĚĂƐƚŚĞǁĞŝŐŚƚĞĚĂǀĞƌĂŐĞŽĨƚŚĞĐŽƐƚŽĨƚŚĞĚĞďƚ
production are different for each reference plant. However, to get comparable results, the
ĚƉƌŽĨŝƚĂďŝůŝƚǇ͘ financial parameters used to calculate the LCOE are the same for all technologies. They
correspond to typical parameters used to finance CSP plants in Spain.
WĂŐĞϭϬϴ
103 Development of Local Supply Chain
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Appendix 7.
Cost Evolution for
various CSP Technologies
A. Linear Fresnel Reflector Technology
Table 57:
Investment Costs for the 30 MW LF Plant without Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 39.2 173.2
Mirrors 3.7 16.3
Support structures 19.4 85.8
Drive mechanisms 2.3 10.1
Land leveling 3.9 17.2
Foundations 2.2 9.5
Assembly 6.2 27.2
Assembly facility 1.5 6.8
Thermal conversion system 16.0 70.8
Receiver tubes (considered 4m unit) 11.8 52.1
Piping, valves and spare parts 2.4 10.6
Natural Gas Boilers 1.8 8.0
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Cont...
CONCEPT COST (US$ million) COST (Rs crores)
Thermal storage system 0.9 3.8
Thermal storage medium (water). N/A 0.0 0.0
Tank 162m3 (civil work included) 0.9 3.8
Heat exchangers. N/A 0.0 0.0
Pumps. N/A: Included in the power block 0.0 0.0
Electrical conversion system 72.1 318.5
Oil/steam heat exchanger. N/A 0.0 0.0
Power block 37.1 164.0
Balance of plant (BOP) 24.2 107.1
Civil work 10.7 47.4
Project management and EPC 21.7 95.8
Project management 2.1 9.5
EPC (17%) 19.5 86.4
TOTAL 149.8 662.1
Source: CENER, 2011.
Cost Breakdown by Subsystem
g Solar collection
The investment cost of the solar collection system includes construction-related costs,
such as land leveling, foundations, assembly, and assembly facilities. It also includes the
cost of the key technological components presented in the Activity 1.1. Figure 27shows
the subsystem investment cost breakdown by key components and cost items.
Figure 27:
Cost Breakdown Diagram for Solar Collection System of LF Power Plant
Assembly
facility,
Assembly, 4%
16%
Mirrors
9%
Foundations,
6%
Land leveling,
10%
Support
Drive mechanisms, structures,
6% 50%
105 Development of Local Supply Chain
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As it is shown in the figure, the current weight of the support structures in comparison to the
rest of the solar collection system cost items is high.
g Thermal conversion
The thermal conversion system is less complex than in other technologies, because it
directly generates the steam that goes to the turbine, avoiding secondary fluids and
the heat exchanger, for example. Costs involving receiver tubes have been estimated in
accordance with available prices for parabolic trough technology, for the commercialized
receiver tube with a quasi-standard dimension of 4 m. Costs of the thermal conversion
system have been studied according to three main components or group of elements, as
Figure 28 shows.
Figure 28:
Cost Breakdown Diagram for Thermal Conversion System of LF Reflector Power Plant
Natural Gas
Boilers,
11%
Piping, valves and
spare parts, Receiver tubes
15% 74%
g Thermal storage
Storage system has not been included in the reference plant for this technology. However,
there is a consideration to be made. The configuration of this plant makes it necessary to
have a steam separator that keeps controlled the properties of the steam produced along
the collectors. This steam separator consists of either a single or several steam drum/
tank that store saturated steam, acting as a buffer. The system is not specifically designed
with storage purposes, but it gives the power plant some reaction time, which would
help in short transient conditions. This is the reason this installation can be considered
in this subsystem. For the current case, two tanks of 160 m3 capacity each have been
considered in the installation.
g Electrical conversion
As mentioned already, the power block has a total power output of 30 MW, with two
turbines of 15 MW. The cost breakdown of the system is shown in Figure 29.
Overall Investment Cost Evolution
The overall investment cost of the reference plant is expected to experience a cost reduction
between 8 percent and 14 percent by 2020, as shown in Figure 30.
106 Development of Local Supply Chain
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Figure 29:
Cost Breakdown Diagram for Electrical Conversion System of LF Reflector Power Plant
Civil work
15%
Balance of plant (BOP)
Power block
34%
51%
Figure 30:
Overall Investment Cost Evolution of the LF Reflector Power Plant
Overall Investment Cost Evolution
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Main factors considered for the estimation of the cost evolution for linear Fresnel reflector
technology are summarized in Table 58.
Cost Evolution Detailed by Subsystem
g Mirror assemblies
Cost reductions related to mirror assemblies are mainly a consequence of the
implementation of the mass production, as well as the possible introduction of new
reflector materials. Current mirror technology adapted to linear Fresnel reflector is
well known, and no special breakthroughs are foreseen. The cost decrease related to the
107 Development of Local Supply Chain
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Table 58:
Summary Table of the Main Factors Considered for the Estimation of the Cost Evolution for
Linear Fresnel Reflector Technology
Subsystem Component Decrease factor Midterm Long-term
cost decrease cost decrease
potential potential
Solar Mirror assemblies Mass production 4–5% 6–8%
collection Mass production and material savings 20–25% 25–35%
Support structures Standardization (breakthrough) 6–12% —
Drive mechanism Experience curve P.R. = 85–87%
Thermal Heat collection Wide operational improvement 15–20%
conversion elements Size increase (breakthrough) 10% —
Electrical Power block Experience curve P.R. = 99–100%
conversion BOP Experience curve P.R. = 90–95%
Source: CENER, 2011
mass production is estimated to be around 4–5 percent at a midterm (2015), reaching a
decrease up to 6–8 percent in the long term.
g Support structure
Current support structure designed for linear Fresnel reflector collectors has still a margin
to be optimized. Only a couple of specific Fresnel collectors have been implemented in
existing power plants, so the cost reduction expected for this component is expected
to be oriented in this direction. Changes related to the implementation of the mass
production and the material savings can have an important impact of 20–25 percent in
the midterm (2015) and of 25–35 percent in the long term (2020).
An important factor to take into account is standardization. Nowadays a regulation of
the CSP technology is being carried out and it is expected to play an important role in
every CSP technology. This is explained more widely in the respective parabolic trough
section, since this is the technology used as a starting point with the regulation process.
Since parabolic trough technology is expected to have an impact in 2014, it is estimated
that, for the rest of the CSP technologies, this breakthrough will occur at least one year
later. The standardization is estimated to entail an additional cost reduction between 6
percent and 12 percent in the structure cost reduction in 2015.
g Others components of the solar collection subsystem
The rest of the elements included in the solar collector system are not expected to
achieve remarkable cost reductions. For the reflector drive mechanism, only a cost
reduction related to the experience curve is being considered, taking a progress ratio
of 85–87 percent. Neither will the rest of the components and labor work contemplated
experience a noteworthy cost decrease.
g Heat collection elements
A wide cost reduction of this element has been estimated, related mainly to the short
operational experience of this technology. By 2020, a continuous cost reduction up to
108 Development of Local Supply Chain
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15–20 percent will be estimated. Besides, a possible breakthrough has been regarded, in
accordance with the parabolic trough technology prediction. It has been identified in
the parabolic trough technology the option of increasing the size of the receiver tubes,
thus reducing the manufacture investment costs. This change would also be related
with vacuum tubes in linear Fresnel technology, which have a similar configuration.
This optimistic foreseen will have an impact of approximately 10 percent in the cost
reduction, by 2016.
g Thermal storage
No special comments can be made to the cost reduction associated to the current system,
since it is being understood in this section. The cost of the buffer system is a stable cost
and it is not expected to experience a considerable decrease.
g Electrical conversion
Elements associated to conventional installations have already experienced a big impact
on their cost reduction in the latest years. That is the reason why, in general, for the plant
configuration here considered a reference for implementing a saturated steam Rankine
cycle, no additional improvements are estimated that can cause a further cost reduction
than the expected experience curve. For this analysis, a progress ratio of 99–100 percent
has been chosen for the power block, since the cost evolution of this system is limited by
the hard operational conditions of the power plant, and a ratio of 90–95 percent has been
taken for the BOP.
B. Parabolic trough technology
Table 59:
Investment Costs for the 50 MW PT Plant with 6 Hours Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 170.7 754.6
Mirrors 27.7 122.5
Support structures 55.4 245.0
Drive mechanisms 6.0 26.7
Land leveling 16.6 73.5
Foundations 27.7 122.5
Assembly and assembly facility 37.3 164.5
Thermal conversion system 66.6 294.5
Thermal oil 5.1 22.4
Receiver tubes 29.4 129.9
Ball joints 1.0 4.2
Piping, valves and spare parts 3.1 13.5
Oil forwarding skid (filters, piping, pumps, tanks, assembly) 19.9 88.0
Oil purification system 0.5 2.4
Fire protection system, inertization system 3.9 17.5
Natural gas boilers 3.8 16.7
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Cont...
CONCEPT COST (US$ million) COST (Rs crores)
Thermal storage system 52.3 231.3
Storage medium (molten salts) 21.0 93.0
Molten salts forwarding skid (tanks, pumps, piping) 18.0 79.6
Heat exchangers 7.3 32.2
Initial filling system 1.7 7.6
Civil work 4.3 19.0
Electrical conversion system 94.4 417.1
Oil/steam heat exchanger 17.2 75.8
Power block 37.2 164.3
Balance of plant (BOP) 25.7 113.8
Civil work 14.3 63.2
Project management and EPC 67.8 299.5
Project management 2.1 9.5
EPC (17%) 65.7 290.3
TOTAL 452.0 1997.6
Source: CENER, 2011.
Table 60:
Investment Costs for the 50 MW PT Plant without Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 106.7 471.4
Mirrors 17.3 76.6
Support structures 34.7 153.1
Drive mechanisms 3.8 16.7
Land leveling 10.4 45.9
Foundations 17.3 76.6
Assembly 20.8 91.9
Assembly nave 2.5 10.9
Thermal conversion system 43.3 191.5
Thermal oil 3.2 14.0
Receiver tubes 18.4 81.2
Ball joints 0.6 2.6
Piping, valves and spare parts 1.9 8.5
Oil forwarding skid (filters, piping, pumps, tanks, assembly) 12.4 55.0
Oil purification system 0.5 2.4
Fire protection system 1.6 7.2
Inertization system 0.8 3.7
Natural Gas Boilers 3.8 16.7
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Cont...
CONCEPT COST (US$ million) COST (Rs crores)
Electrical conversion system 94.4 417.1
Oil/steam heat exchanger 17.2 75.8
Power block 37.2 164.3
Balance of plant (BOP) 25.7 113.8
Civil work 14.3 63.2
Project management and EPC 44.0 194.6
Project management 2.1 9.5
EPC (17%) 41.9 185.2
TOTAL 288.4 1274.6
Source: CENER, 2011.
Cost Breakdown by Subsystem
g Solar collection
The solar collection system includes not only main components already explained, but
also work costs related to this system. The associated cost breakdown can be seen in
Figure 31.
Figure 31:
Cost Breakdown for the Solar Collection System of the Reference PT Power Plant
Assembly
facility
Assembly, 2%
20%
Mirrors
16%
Foundations,
16%
Land leveling,
10%
Support
Drive mechanisms, structures,
4% 32%
As it can be observed, the support structure is the element with the most important weight
(32 percent) in the solar collection system, followed by mirror assemblies (16 percent).
g Thermal conversion
The thermal conversion system takes into account not only receiver tubes and thermal
oil, but also the whole infrastructure associated with the use of the thermal oil. That
means oil-forwarding skid, oil purification system, inertization system, and fire
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protection system. This last component has been included in this system because of its
strong relation with the synthetic oil, even if it can also be considered as a part of the
balance of plant (BOP) integrated in the electrical conversion system.
Another component included here is the natural gas boiler. This decision has been made
because of the function of the boiler, which is heating the synthetic oil when needed.
That leads to a direct relation with the thermal conversion system. The cost breakdown
estimated for the thermal conversion system is shown in Figure 32.
Figure 32:
Cost Breakdown for the Thermal Conversion System of the Reference Power Plant
Inertization system
Natural
2%
Gas Boilers
Fire protection 6%
system
4% Thermal oil
Oil purification 7%
system
1%
Receiver tubes
Oil
44%
forwarding skid
30%
Piping, valves and
Ball joints
spare parts
1%
5%
It can be observed that a high percentage of the investment cost related to the thermal
generation system involves the receiver tubes (44 percent).
g Thermal storage
The thermal storage system considered consists of two tank molten salts thermal storage,
which can supply a total thermal power of 300.000 MWh. The cost breakdown related
to each component or activity corresponding to the current system can be observed in
Figure 33.
Figure 33 shows that a high fraction of the investment costs, 40 percent, is related to
the storage medium. However, all the equipment needed specifically for forwarding this
storage medium also means a high fraction (35 percent) of the overall system costs.
g Electrical conversion
Investment costs related to the electrical conversion system have been mainly divided in
three different sections: the power block, the BOP, and the heat exchanger. In general,
the heat exchanger can be considered a part of the power block, since it operates at the
same operating conditions as the rest of the components also here included. However, in
the current cost analysis, it has been chosen to analyze it separately. The cost breakdown
estimated for this system can be observed in Figure 34.
112 Development of Local Supply Chain
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Figure 33:
Cost Breakdown for the Thermal Storage System for the Reference Power Plant
Initial filling system
3% Civil work
8%
Heat exchangers
14%
Molten salts Storage medium
forwarding skid (molten salts)
35% 40%
Figure 34:
Cost Breakdown for the Electrical Conversion System for the Reference Power Plant
Civil work Oil/steam heat
15% exchanger
18%
Balance of plant (BOP) Power block
27% 40%
Overall Investment Cost Evolution
The overall investment cost is expected to experience a cost reduction between 11 percent
and 19 percent by 2020, as can be seen in Figure 35.
113 Development of Local Supply Chain
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Figure 35:
Overall Investment Cost Evolution for the Power Tower Technology
Overall Investment Cost Evolution
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Main factors considered for the estimation of the cost evolution are summarized in Table 61 below.
Table 61:
Summary Table of the Main Factors Considered for the Estimation of the Cost Evolution for
CR Technology
Subsystem Component Decrease factor Mid term Long-term
cost decrease cost decrease
potential potential
Solar Mirror assemblies New mirror concept 8–10% 18–22%
collection Support structures Mass production and material savings 12–20% 25–30%
Standardization (breakthrough) 6–12% —
Drive mechanism Experience curve P.R. = 85–87%
Thermal Heat collection Operational improvements: glass to 15–20%
conversion elements metal seal.
Size increase (breakthrough) 15% —
Oil/water heat Experience curve P.R. = 75–85%
exchangers
Thermal Molten salts Thermocline concept 20% —
storage Fluid handling system Thermocline concept 10% —
Electrical Power block Experience curve P.R. = 99–100%
conversion BOP Experience curve P.R. = 90–95%
Source: CENER, 2011
114 Development of Local Supply Chain
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Cost Evolution Detailed by Subsystem
g Mirror assemblies
Glass-silver mirror technology has been used for a long time. This means that the
important cost reduction related to this technology is negligible. Only cost reductions
related to a new mirror expertise could be considered. This means the introduction of
new materials (aluminum, polymeric) in the market, some of which are already under
development and testing. Main barriers experienced by these new designs are related
to the degradation of the materials, but it is expected that, in the period analyzed, these
problems will be mostly solved. The cost reduction related to a new mirror concept
is estimated around 8–10 percent for a midterm and around 18–22 percent for a
long term, taking into account both the material cost and savings related to the
manufacture processes.
g Support structure
Cost reduction associated to trough support structure is expected to be related mainly to
two factors: On the one hand, structures are expected to experience a weight reduction
that would lead to material savings of between 5 and 10 percent of the current weight.
This advance is expected to have a great impact in manufacture costs, and the impact can
be estimated in reference to the lessons learned from the automobile sector. This way,
cost reductions have been estimated to experience an effect in short/midterm (2015)
of 12–20 percent of the current support structure cost reaching up to 25–30 percent
by 2020. On the other hand, the standardization will play an important role in this
technology. Up to now, there is a lack of regulation and law according to standardization
of this technology. With the appearance of a CSP regulation, which establishes the design
criteria of structure designing, conservative stands in component design can be avoided.
This also happened with other renewable energies. It is interesting to remark that two
current collector designs show a difference close to 15 percent in the wind loads assumed
for the structure design. This standardization is estimated to entail an additional cost
reduction near to 6–12 percent in the structure cost reduction for a midterm.
g Other components of the solar collection subsystem
The rest of the elements included in the solar collector system are not expected to have
remarkable cost reductions. The trough drive mechanism is expecting a cost reduction
as a consequence, mainly, of the experience curve. For this component, a progress ratio
of 85–87 percent can be expected. Neither will the rest of the components and labor
work contemplated experience a noteworthy cost decrease.
g Heat collection elements
The most significant awaited cost reduction of the heat collection element is related to the
increase in their length. However, up to now, receiver tubes have a dimension that could
be defined as “standardized,” since every commercial collector design has been intended
in relation to these HCE dimensions. That is why, for short- or midterm estimation,
this possibility is not being considered. Furthermore, an increase in the diameter will
imply a proportional increase of the mirror aperture, as well as its length, so this cost
reduction cannot be applied only to receiver tubes, since it also leads to a redesign of the
whole solar collector assembly. This possible action line is expected to have an impact
115 Development of Local Supply Chain
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of 15 percent of the heat collection element’s current investment costs. However, it has
to be remarked that this change would affect not only the heat collection element, but
also the design of the whole solar collector. For a global estimation, this measure could
imply up to 7 percent decrease of the whole plant investment costs. Other factors to
be considered are mainly related to specific improvements, like the glass to metal seal.
Nowadays the technology used for this seal is complicated and thus expensive. This cost
reduction is estimated as a consequence of advances in this manufacture technology. It
is also possible to have a cost reduction derived from the use of heat collection elements
of different characteristics in some field areas working at a lower temperature. Less
sophisticated receiver tubes can be implemented in certain places of the solar field
getting an associated cost reduction.
g Other components of the thermal conversion subsystem
Other elements included in this system, mainly related to the heat transfer fluid and its
handling system, will not experience remarkable cost reductions. Synthetic thermal oil
has been used for a long time, so a remarkable cost reduction is not being expected. A
change in the working fluid would be the only breakthrough to be expected. However,
this change would mean a complete cost analysis different from the current reference
situation, as a new plant configuration will be needed having a great impact in investment
costs. However, considering the plant as a whole, a replacement of the current working
fluid into molten salts could decrease the total plant cost around 20 percent in a
midterm, increasing the efficiency up to 6 percent. In the case of implementing direct
steam generation technology, this change would lead to a cost reduction of around 4
percent, reaching an efficiency total increase of the plant around 7 percent. Otherwise,
evolution of heat exchangers has been considered an experience curve with a progress
ratio of 75–85 percent.
g Thermal storage
In a mid- to long term (2015), it is expected that the current storage system configuration
of two tanks of molten salts will evolve to only one thermocline storage tank, a concept
currently being developed. Even if this change would mean a change in the technology of
the current reference power plant, it has been handled as a breakthrough. The thermocline
tank concept will cause a reduction in the amount of molten salts needed, with an
expected impact in cost reduction around 20 percent. The molten salts forwarding skid,
including pumps, piping, tanks, and other elements needed in the system, will also have
an impact associated to the reduction of the molten salts quantity. Some elements will
experience a cost reduction proportional to the storage medium, like storage reservoirs,
but other elements are not directly related. It has been estimated an impact of 10 percent
for the fluid handling system.
g Electrical conversion
Electric conversion system is mainly composed of conventional components with
a large experience, so the primary reduction costs considered are mainly related to
the experience curve related to power block and balance of plant. The progress ratio
considered is the same as the case of the linear Fresnel reflector technology, so the same
considerations can be applied.
116 Development of Local Supply Chain
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C. Power tower technology
Table 62:
Investment Costs for the 17 MW CR Plant with 15 Hours Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 86.8 383.7
Mirrors 5.2 23.1
Support structures 36.6 161.7
Drive mechanisms 26.5 117.1
Land leveling 4.6 20.2
Foundations 3.0 13.5
Assembly 8.7 38.5
Assembly facility 2.2 9.6
Thermal conversion system 58.3 257.8
Heat exchange fluid (molten salts) 8.8 38.7
Solar receiver 36.0 159.3
Mechanical system ( piping, salts pumps) 5.0 22.1
Fire protection system 0.8 3.4
Inertization system 0.4 1.9
Natural gas boilers 1.5 6.8
Civil work: receiver tower 5.8 25.6
Thermal storage system 71.5 316.0
Storage medium (molten salts); N/A: Included in receiver 0.0 0.0
Molten salts forwarding skid (tanks, pumps, piping) 5.4 23.8
Heat exchangers. N/A 0.0 0.0
Initial filling system 0.5 2.3
Civil work 1.3 5.7
Electrical conversion system 50.9 225.0
Heat exchangers salts/steam 7.0 30.9
Power block 20.3 89.9
Balance of plant (BOP) 15.7 69.2
Civil work 7.9 34.7
Project management and EPC 34.0 150.4
Project management 3.0 13.5
EPC (15%) 30.9 136.7
TOTAL 237.2 1048.4
Source: CENER, 2011
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Table 63:
Investment Costs for the 17 MW CR Plant without Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 32.3 142.8
Mirrors 1.9 8.6
Support structures 13.6 60.3
Drive mechanisms 9.9 43.7
Land leveling 1.7 7.5
Foundations 1.1 5.0
Assembly 3.2 14.3
Assembly facility 0.8 3.6
Thermal conversion system 49.9 220.6
Heat exchange fluid (molten salts) 0.3 1.2
Solar receiver 36.0 159.3
Mechanical system ( piping, salts pumps) 5.0 22.1
Fire protection system 0.8 3.4
Inertization system 0.4 1.9
Natural gas boilers 1.5 6.8
Civil work: receiver tower 5.8 25.6
Thermal storage system 0.1 0.6
Storage medium (molten salts). N/A: included in receiver 0.0 0.0
Molten salts forwarding skid (tanks, pumps, piping) 0.2 0.8
Electrical conversion system 50.9 225.0
Heat exchangers salts/steam 7.0 30.9
Power block 20.3 89.9
Balance of plant (BOP) 15.7 69.2
Civil work 7.9 34.7
Project management and EPC 22.3 98.6
Project management 2.0 8.8
EPC (15%) 20.3 89.7
TOTAL 155.6 687.6
Source: CENER, 2011
Cost Breakdown by Subsystem
g Solar collection
A solar collection system can be very different from a specific power tower plant to
another. The current case has fixed a specific solar field according to the Gemasolar
power plant, which considers a circular plant layout with heliostats of the Senertrough
design. With these characteristics, the breakdown of to the solar collection system is
shown in Figure 36.
118 Development of Local Supply Chain
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Figure 36:
Cost Breakdown for the Solar Collection System of the Reference Power Tower Plant
Assembly facility
2%
Assembly
10% Mirrors
Foundations 6%
4%
Land leveling
5%
Support structures
42%
Drive mechanisms
31%
As it can be observed, the major fraction from the costs of the solar collection system is
associated with the support structure of the solar collector assembly, corresponding to a
percentage of 42 percent. In the second place, drive mechanisms represent 31 percent of
the system. It is interesting to observe that mirrors only represent a 6 percent of the whole
system, almost a third of the fraction that this component represented in parabolic trough
(16 percent). This is a consequence of the curvature process carried out in the parabolic
trough technology that adds an additional cost as a consequence of the bending process.
g Thermal conversion
Thermal conversion of a power tower plant has not many things in common with the
already analyzed linear Fresnel reflector technology and parabolic trough technology.
The solar receiver is a unique element for the whole solar collection system which is
located atop a tower. This implies some new considerations:
– There is a new element included in this system, derived from the need to have the
receiver at a high distance from the ground: the receiver tower. This adds new
investment costs related not only to new material, but also to building work.
– Heat exchange fluid has been replaced by salts, with a lower cost than synthetic oil.
– The need to pump the new thermal fluid to the receiver, located in the top of the
tower, implies new and more powerful equipment (pumps as well as piping, valves, for
example). However, auxiliary equipment is not implemented in the solar field because
the working fluid does not flow across, as happened in the parabolic trough.
The breakdown related to the thermal conversion system is shown in Figure 37.
As it can be observed, the solar receiver has an important weight of the thermal conversion
system (62 percent).
119 Development of Local Supply Chain
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Figure 37:
Cost Breakdown for the Thermal Conversion System of the Reference Power Tower Plant
Natural Gas Boilers Civil work:
3% receiver tower 10%
Inertization sytem
1% Heat exchange
Fire protection fluid (molten sals)
system 1% 15%
Mechanical system
8%
Solar receiver
62%
g Thermal storage
The thermal storage system considered in the current case is also a two-tank molten
salts storage system. The main difference to be noted in this case in comparison to the
previous cases is that no heat exchanger is needed. In this case, the storage medium
(molten salts) has not been included in the thermal storage system, since it is the same
as the heat transfer fluid considered in the solar collection system.
Figure 38:
Cost Breakdown for the Thermal Storage System of the Reference Power Tower Plant
Civil work
18%
Initial filling
system Molten salts
7% forwarding skid
75%
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g Electrical conversion
Electrical conversion system has no special remarks to point out. The main difference
of this case in comparison to both cases already analyzed is the heat exchanger. Linear
Fresnel reflector technology has no need for a heat exchanger, since it operates with direct
steam generation, and parabolic trough has implemented an oil/steam heat exchanger.
The current case also needs a heat exchanger, but in this case, the technology used is a
salts/steam heat exchanger.
Figure 39:
Cost Breakdown for the Electrical Conversion System of the Reference Power Tower Plant
Civil work Heat exchangers
15% salt/steam
14%
Balance of plant Power block
(BOP) 40%
31%
Overall Investment Cost Evolution
The overall investment cost is expected to experience a cost reduction between 21 percent
and 33 percent by 2020, as can be seen in Figure 40.
Figure 40:
Overall Investment Cost Evolution for the Power Tower Technology
Overall Investment Cost Evolution
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
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Main factors considered for the estimation of the cost evolution for Power Tower technology
are summarized in Table 64.
Table 64:
Summary Table of the Main Factors Considered for the Estimation of the Cost Evolution for
CR Technology
Subsystem Component Decrease factor Midterm Long-term
cost decrease cost decrease
potential potential
Solar Mirror assemblies New mirror concept 4–5% 6–8%
collection Support structures Mass production and material savings 15–18% 17–20%
Standardization (breakthrough) 6–12% —
Drive mechanism Experience curve P.R. = 85–87%
Thermal Solar receiver Experience curve P.R. = 90–95%
conversion Molten salts/water heat exchanger Experience P.R. = 75–
curve 85%
Oil/water heat Experience curve P.R. = 75–85%
exchangers
Thermal Molten salts Thermocline concept 20% —
storage Fluid handling system Thermocline concept 10% —
Electrical Power block Experience curve P.R. = 99–100%
conversion BOP Experience curve P.R. = 90–95%
Source: CENER, 2011
Cost Evolution Detailed by Subsystem
g Mirror assemblies
Similar considerations can be made to this component in comparison to the other
technologies. Only cost reductions related to new mirror knowledge could be taken into
account. The cost reduction related to a new mirror concept is estimated around 4–5
percent for the midterm and around 6–8 percent for the long term, similar to the linear
Fresnel reflector technology.
g Support structure
Cost reduction associated to support structure is expected to be associated to the same
factors as already explained in the parabolic trough technology. Even if the impact related
to the standardization is considered the same as in linear Fresnel reflector technology,
cost reduction related to weight reduction and mass production is expected to have an
effect of around 15–18 percent by 2015 and 17–20 percent by 2025. The breakthrough
caused by standardization has also been considered in the range of 6–12 percent.
g Other component of the solar collection subsystem
The rest of the elements included in the solar collection system are not expected to have
remarkable cost reductions. The trough drive mechanism is expecting a cost reduction
as a consequence, mainly, of the experience curve. For this component, a progress ratio
122 Development of Local Supply Chain
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of 85–87 percent can be expected. Neither will the rest of the components and labor
work contemplated experience a noteworthy cost decrease.
g Heat collection elements
The solar receiver implemented in the current case consists mainly of stainless steel
tubes, where molten salts flow through and absorb the radiation of the solar field. Hence,
no special cost reductions are expected, so an experience curve of 90–95 percent has
been considered.
g Other components of the thermal conversion subsystem
The rest of the elements are not expected to experience big changes. Heat exchanger
has been considered with a similar evolution to the respective case in parabolic trough
technology. An experience curve of 75–85 percent progress ratio has been adjusted.
For the rest of the equipment, typical progress ratios are given, too, for their respective
experience curves. The most different element included in this system in comparison
with the other technologies studied is the receiver tower. However, this element is a
typical construction with extensive experience in sectors related to big infrastructures.
Therefore, its expected cost evolution can be considered negligible.
g Thermal storage
Similar considerations can be made for this system to those already mentioned in the
parabolic trough section. The thermocline tank concept, in case it will be implemented,
will cause a reduction in the amount of molten salts needed, and will cause an expected
impact in cost reduction around 20 percent. The rest of the equipment will experience a
cost reduction of 10 percent.
D. Parabolic Dish Technology
Table 65:
Investment Costs for the 10 MW PD Plant without Thermal Storage
CONCEPT COST (US$ million) COST (Rs crores)
Solar collection system 20.9 92.3
Mirrors 2.3 10.1
Support structures 8.1 36.0
Drive mechanisms 5.1 22.8
Mechanic assembly 2.6 11.4
Land leveling 0.5 2.4
Foundations 0.4 1.6
Assembly 1.5 6.7
Assembly facility 0.3 1.1
Plant infrastructure 9.2 40.4
Electrical equipment assembly 3.0 13.3
Electric infrastructure 4.9 21.5
Lighting, safety and lightning conductor 0.5 2.2
Transformer station civil works 0.8 3.3
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Cont...
CONCEPT COST (US$ million) COST (Rs crores)
Thermal and electrical conversion system 42.6 188.3
Receiver-electric motor 34.3 151.7
BOP 8.3 36.6
Project management and EPC 11.7 51.8
Project management 0.7 3.2
EPC (15%) 11.0 48.6
TOTAL 84.2 372.2
Source: CENER, 2011
Cost Breakdown by Subsystem
g Solar collection
For this subsystem, the cost analysis carried out can be observed in Figure 41.
Figure 41:
Cost Breakdown for the Solar Collection System of the Dish Stirling Reference Power Plant
Assembly Assembly facility
7% 1%
Foundations
Mirrors
2%
11%
Land leveling
3%
Mechanic assembly
12%
Drive mechanisms
25% Support
structures
39%
As it can be observed, the component that means the major percentage of the solar collection
system is the support structure (39 percent).
g Thermal and electrical conversion
This system has been divided into only two groups of components. In the first one, the
joint of the thermal receiver and the Stirling motor have been gathered. In the second
group, the auxiliary elements that are needed (such as a cooling system) have been
included. The cost breakdown is shown in Figure 42.
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Figure 42:
Cost Breakdown for the Thermal and Electrical Conversion Systems of the Dish Stirling
Reference Power Plant
BOP
19%
Receiver-Electric
Motor
81%
Overall Investment Cost Evolution
The overall investment cost is expected to experience a cost reduction between 39 percent
and 53 percent by 2020, as it can be seen in Figure 43.
Figure 43:
Overall Investment Cost Evolution of the Dish Stirling Technology
Overall Investment Cost Evolution
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Main factors considered for the estimation of the cost evolution for dish Stirling technology
are summarized in Table 66.
125 Development of Local Supply Chain
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Table 66:
Summary Table of the Main Factors Considered for the Estimation of the Cost Evolution for PD
Technology
Subsystem Component Decrease factor Midterm Long-term
cost decrease cost decrease
potential potential
Solar Mirror assemblies Process’ automation and mass 20–25% 35–40%
collection production
Support structures Mass production and material savings 17–20% 25–28%
Standardization (breakthrough) 6–12% —
Solar to Receiver-electric Experience curve P.R.=90–95%%
electrical motor and BOP
energy
conversion
Source: CENER, 2011.
Cost Evolution Detailed by Subsystem
g Mirror assemblies
Investment costs related to mirror assemblies are expected to experience a considerable
decrease. Up to now, this technology has been scarcely developed and a wide margin
in improvement of this component can be foreseen. It has been estimated that process
automation and mass production will be able to get a decrease of around 20–25 percent
in a midterm, and around 35 percent and 40 percent in a long term.
g Support structure
The support structure will follow the same trend as the rest of the technologies. That
means that a breakthrough caused by the standardization will reduce the costs in 2015
around 6–12 percent, and an additional cost reduction related to material savings and
other factors is estimated around 17–20 percent in the midterm, and 25–28 percent in
the long term.
g Solar to electrical energy conversion
Because of the lack of information, it is not easy to make an estimation of the economical
evolution of this system. However, the power block, consisting mainly in the Stirling
engine, is a technology known for decades, and it is considered as a mature system. For
the current systems, the cost evolution will be considered an experience curve of 90–95
percent progress ratio.
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Appendix 8.
Approach to Data Research
and Modeling
A. Primary Research
Methodology
A significant portion of the study was devoted, through primary research, to understanding
the capability and maturity of the different value chain players, as well as the market dynamics
that are expected to emerge over the three phases of JNNSM. Detailed questionnaires
to capture important market and organization specific parameters were developed and
administered with the target companies. The primary research aimed to gather as much
information as possible through face-to-face interactions with the senior management of
the target organizations. Most of the questions were intentionally kept qualitative and open
ended to encourage detailed discussion on the subject. The responses were tabulated and
converted into quantitative values wherever possible, and further analyses were performed
on those quantitative values to arrive at various indicative numbers that are presented
throughout the report.
The questionnaire contained questions related to both internal and external factors,
which are supposed to play a major role in the overall success of JNNSM, of the target
organization (Table 67):
127 Development of Local Supply Chain
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Table 67:
External and Internal Factors Considered at the Questionnaire
Internal factors External factors
1. Client Information 1. Social and Political Factors
2. Organization 2. Economic Factors
3. Supply Chain 3. Technology Factors
4. Cost 4. Legal and Environmental
5. Competency 5. Factors
For complete details of the questionnaire that was administered, refer to Appendix 1.
Table 68 gives a summary of the number of value chain players who had participated in the
primary research. For a complete list of companies in each value chain segment, refer to
sections below.
Table 68:
Number of Value Chain Players Involved in the Primary Research
Value Chain Player No of organizations
Developers 5
EPC players 2
Technology providers 3
Component manufacturers—heat exchangers 1
Component manufacturers—turbines 2
Component manufacturers—mirrors/receiver tubes 5
Component manufacturers—tracking & drive mechanism 2
Component manufacturers—HTF 2
Component manufacturers—HTF pumps 2
Component manufacturers—support structures 1
Component manufacturers—glass bending equipment 1
Government body 1
Academic/research institution 3
In general, inputs from them were immensely beneficial in understanding the minimum
market potential, cost numbers for setting up CSP plants in India, potential for cost
reduction through localization of production, and supplier ecosystem development, as well
as the impact on the Indian economy. It also helped in understanding the current capability
of individual players in CSP value chain, the target cost numbers for Indian developers,
both at an overall and at a component level, the levers for cost reduction in India for CSP
manufacturing, and the expectation of the value chain players from the government in
developing the overall market.
All the calculations arrived at using the responses from the primary survey are for installed
capacity per MW. No calculations have been made on electrical production.
128 Development of Local Supply Chain
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It is important to keep in mind that, when talking about costs per MW, we also have to
consider the characteristics of the plant analyzed, concerning not only the type of technology
implemented, but also the hours of storage, for example. The final cost per MW, as well as
the final production per year, may differ depending on the final plant configuration and
technology used.
The Indian scenario and the development in Phase I of JNNSM consider CSP power plants
without thermal storage in order to calculate the investment numbers per MW, market size,
and economic and labor impact.
Primary Survey Questionnaire
Cost Factors:
Capital investment What is minimum capacity required for a new plant? What is the capital
investment needed?
Cost breakup What is the approximate cost breakup for the component? What are the
main direct and indirect costs? Is the process labor intensive?
Raw materials form what percentage of the sales value? Where are these
sourced from?
Conversion costs form what percentage of the sales value?
Cost per unit What is the approximate cost per unit of the CSP component made by
you?
What is the extent of cost reduction per unit that can be expected with
mass manufacturing in future years for the CSP components?
Modification cost Do you have additional line capacities? Can you modify them to
manufacture CSP components? What are the costs involved in this
modification?
Issues and challenges What are the main cost drivers? What are the challenges in keeping the
main cost drivers down?
Competency Factors:
Core competency What is your main competency? What are the characteristics of your
competency? Is it based on flexibility, speed, precision, and reliability?
Substitutes Do you have competitors who share similar competencies? How do you
distinguish yourself from them?
Adaptability for CSP How easily can you tap into your core competency for CSP component
manufacturing? Do you expect any synergies between the new setup and
products you manufacture?
International collaboration Do you have collaboration with international players for R&D and
technology transfer activities? If yes, can you name a few?
Manpower skills What kind of skills do you need to develop within your employees to
manufacture CSP components?
Equipment upgrades Do you need significant equipment upgrades in your current setup to
manufacture CSP components? If yes, what kind of upgrades are required?
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Risk Factors:
Business risk What risks are involved in CSP component manufacturing? (Inadequate
demand, demand variability, changing technology, competition from
foreign players, lack of standardization, for example.)
Demand projections Do you have any demand projections for the CSP components? Does this
also include export potential? What is the minimum market demand that
you are targeting to invest in the CSP component manufacturing?
Incentives What are the various incentives for CSP component suppliers? Do they get
any carbon credits?
Financing the projects What are various sources of attractive financing for CSP component
manufacturing for developing their potential?
Project feasibility What is your expected rate of return on this project? What is your time
horizon?
Equipment upgrades Do you need significant equipment upgrades in your current setup to
manufacture CSP components? If yes, what kind of upgrades are required?
Political and Social Factors:
Political
Procedural issues What are the hurdles commonly faced while bidding for the project and
implementing it?
Regulation and deregulation Has government changed its stance on regulations in the nonconventional
trends energy domain in the past? What were the reasons for the change? What
has been its impact?
Social and employment Is there any legislation specified for solar project component
legislation manufacturers?
Tax policy, and trade and What kind of provisions has been made available by the government
tariff controls to increase the attractiveness for investment in solar power? (For
example, feed-in tariffs, discount in tariffs, income tax rebate, accelerated
depreciation, and import duties.)
Environmental and consumer Please state if any.
protection legislation
Likely changes in the State whether you perceive any change in the business environment in case
political environment of a change in political environment.
Social
Education and occupations Likely job creation by investment per MW? Education and awareness benefits?
Media views and publicity Benefits from CSR activities? Media's role to popularize solar power?
Technology Factors:
Key technology What are the key technologies that you would need to make the CSP
component manufacturing viable in India? Can this technology be used for
large-scale production? Do you know the industries that will be helpful in
developing the technology further?
Support Do you have any support from the government or other Indian or
international players to develop CSP manufacturing potential within India?
Access Do you have the access to relevant technology, patents, licenses, IPRs , and
manufacturing techniques needed for manufacturing of CSP components?
Equipment upgrades Do you need significant equipment upgrades in your current setup to
manufacture CSP components? If yes, what kind of upgrades are required?
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Supply Chain Factors:
Manufacturing environment Products are in which of the following manufacturing environments? For
example, made to stock, assembled to order, made to order, engineer to
order? Please elaborate. Please give percentage revenue contribution from
each manufacturing environment related to CSP components.
Complete supply chain for Can you describe the supply chain for a CSP component category?
CSP component Where are the factories located for manufacture?
Where are the key raw materials sourced from—locally and abroad?
Issues and challenges What are the key supply chain issues and challenges faced for CSP
components? Please elaborate.
Table 69:
List of Companies Interviewed
Who in the Industry Company Name Base Location
Developer Acme Tele Power limited Gurgaon
Developer Entegra Limited Mumbai
Developer Lanco Infratech Limited New Delhi
Developer Aurum Renewable Energy Pvt Ltd Mumbai
Developer Godavari Power Raipur
EPC Player L&T Mumbai
EPC Player BHEL Delhi
Technology provider Abengoa Solar Mumbai
Technology provider Areva Solar Delhi
Technology provider Clique Developments Pvt. Limited Mumbai
Heat exchangers Thermax Pune
Turbines BHEL Delhi
Turbines Maxwatt Delhi
Mirrors Saint Gobain Chennai
Mirrors Gujarat Guardian India Ltd Ankleshwar
Mirrors AIS Glass (Potential) Mumbai
Government body MNRE New Delhi
Academic institution IIT Bombay Mumbai
Industry association FAST
Research institution NAL Bangalore
Receiver tubes Schott
Mirrors or receiver tubes Borosil(potential) Mumbai
Tracking and drive mechanism Boschrexroth Mumbai
Tracking and drive mechanism Parker Hanifinn Mumbai
HTF Dow Chemicals Mumbai
HTF Solutia Chemicals Mumbai
HTF pumps KSB India Pune
HTF pumps ITT India Mumbai
Support structures Kalpataru Power Transmissions Limited (potential)
Glass bending equipment Glasstech
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B. Scenario Modeling for CSP in India
Economic benefit of JNNSM was modeled using three scenarios that can emerge over the
lifespan of the mission. In the case of complete target achievement per mission, the phase-
wise capacity additions will happen, as shown in Table 70.
Table 70:
Phase-Wise Capacity Additions for CSP Technologies in India, Optimistic Scenario
DESCRIPTION PHASE I PHASE II PHASE III
(2010–13) (2013–17) (2017–22)
Cumulative JNNSM targets for CSP (MW) 500 2,000 10,000
Capacity additions (MW) 500 1,500 8,000
CR market size(MW) 10 495 2,800
PT market size(MW) 490 1,005 5,200
Source: CENER; AQUA MCG, 2011.
Capacity addition for each phase was calculated using the additional capacity commissioned
in that phase over and above the installed capacity from the previous phase. Considering the
global trends, Table 74 also considers CR a commercially successful technology for CSP in
the future.
The ratio of PT to CR in the overall capacity addition in Table 71 was derived from the
assumptions of CENER and Emerging Energy Research. Figure 44 gives a breakup of the
different technologies in CSP installed GW until 2025.
Figure 44:
Pipeline of the Different Technologies until 2025
30
25
20
Installed GW
15
10 LF
PT
5 CR
PD
0
2007 2008 2009 2010 2011 2012 2013 2014 <2025
Source: CENER; Emerging Energy Research 2010.
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Annual capacity additions in MW per year were calculated using a straight line method,
assuming that JNNSM was implemented successfully. Table 71 describes capacity addition
per year over the three phases of JNNSM. Table 71 also assumes that 2,000 MW of capacity
will be built for export in Phase III.
Table 71:
Capacity Addition per Year over the Three Phases of JNNSM
DESCRIPTION PHASE I PHASE II PHASE III
(2010–13) (2013–17) (2017–22)
Total capacity additions (MW) 167 375 1,600
CR market size(MW) 3 124 560
PT market size(MW) 163 251 1,440
PT market size(MW) 490 1,005 5,200
Source: CENER; AQUA MCG, 2011.
Considering the above factors, the three scenarios in Table 72 have been considered
for analysis.
Table 72:
Scenarios Considered for the Analysis
DESCRIPTION Installed capacity Export Market
in 2022 (MW) Demand in 2022 (MW)
Scenario A (Pessimistic) 2,000 0
Scenario B (Moderate) 6,000 0
Scenario C (as per JNNSM, Optimistic) 10,000 2,000
Source: CENER; AQUA MCG, 2011.
Optimistic Scenario C:
JNNSM is achieved as intended and a total of 10 GW of CSP is installed by the year 2022.
Moderate Scenario B:
60% of JNNSM targets are achieved by the year 2022.
Pessimistic Scenario A:
20% of JNNSM targets are achieved by the year 2022.
In order to calculate the economic impact, investment costs have been estimated for a
reference plant of 100 MW capacity and 8 hours of thermal storage as follows (investment
costs are given in crores/MW).
It should be kept in mind that CR technology has been incorporated, since it is globally
considered a more advanced and promising technology. However, since there is only one CR
plant being setup in India, which is of a very small size (10 MW), the cost estimates given are
very approximate and are based on similar plants in other parts of the world.
133 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Figure 45:
Investment Costs Breakdown by Subsystem for PT and CR Power Plants in Terms of Percentage
14
38% Total Investment for PT Plant = 32.5 crores
12 Total Investment for CR Plant = 27.1 crores
36%
10
Investment (Cr)
8 26%
19% 23%
18%
6 17% PT
CR
4
8% 9%
2
0
Solar collection Thermal Thermal Electrical Project
conversion storage conversion management and
EPC
Source: CENER; AQUA MCG, 2011.
C. Estimation of Minimum Demand Requirement
While JNNSM outlines the planned capacity addition over the three phases, that itself is not
a sufficient condition for indigenization of certain technologies and local manufacturing of
components. Subsequently, at what point global manufacturers and suppliers will invest in a
local manufacturing facility (minimum demand expectation, Figure 5) was estimated from
the primary research, as outlined in Section 1 of this appendix.
Following questions were asked to the component manufacturers to understand their
expectation for local manufacturing setup (under “Economic Factors” in the questionnaire):
Risk Factors:
Business risk What risks are involved in CSP component manufacturing? (For example,
inadequate demand, demand variability, changing technology, competition
from foreign players, and lack of standardization.)
Demand projections Do you have any demand projections for the CSP components? Does this
also include export potential? What is minimum market demand that you
are targeting to invest in the CSP component manufacturing?
Incentives What are the various incentives for CSP component suppliers? Do they get
any carbon credits?
Financing the projects What are various sources of attractive financing for CSP component
manufacturing for developing their potential?
Project feasibility What is your expected rate of return on this project? What is your time
horizon?
Averages of the above minimum demand numbers were taken and plotted against technology
complexity to show the minimum demand requirements for localization of component
production in Figure 5.
134 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Table 73:
Tabulated Results of the Questions Asked to Component Manufacturers
Component or Material Local Manufacturing Min Cumulative Target for
Capability requirement Phase Iii (2017–22)
Turbines 3 100–110 5
Structures-CR 4 50 3
Structures-PTC 4 50 4
Solar steam generators 4 50 2.5
Molten salts 2 25 1.5
Receiver tube-LF 3 100 4
Mirrors PTC- partial manf. 4 140–160 2.5
Receiver tube-PTC 1 200–220 5
Mirrors flat-CR 3 200–225 2
Mirrors PTC-complete manf. 2 300–350 4
Tracking devices PTC 2 450–500 4
Tracking devices CR 1 500–600 3.2
HTF 2 500 3.5
D. Estimation of Market Size and Cost Reduction Potential
Market size for CSP components were estimated using the planned capacity additions over
the three phases on a yearly basis, and the estimated cost of components per MW—derived
based on inputs from manufacturers, component suppliers, and developers, as gathered
from the primary research detailed above. Estimated cost of components per MW was taken
as the average value of all the cost numbers for the upcoming plants in JNNSM Phase I.
Table 74 summarizes the cost reduction potential over the years as expected by different
values chain players in the market and per megawatt cost for Indian plants over the three
phases of the JNNSM.
Table 74:
Expected Percent Cost Reduction in Phase II and Phase III
Component PHASE I PHASE II PHASE III
(2010–13) (2013–17) (2017–22)
Structures—PTC 20 40
Structures—CR 10 10
Solar steam generators 27 27
Mirrors—parabolic 27 27
Mirrors—flat 0 11
Tracking devices—CR 0 30
Tracking devices—PTC 0 38
HTF 0 0
Receiver tube 0 32
Turbines 27 27
This cost reduction is due to Local Manufacturing, Logistics Savings, Customs Duty Savings and IP. They value depict the average value of
responses in primary survey.
135 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Accordingly, component-wise cost per MW for Phase II and Phase III of the JNNSM was
projected using the following expression:
Component cost per MW in Phase 2
= (Component cost per MW in Phase 1)
× (Expected percentage cost reduction)
The output table for the above expression is given in Table 75, with details of average cost
numbers per MW in Phase II and Phase III of JNNSM.
Table 75:
Cost in Rs Crores per MW in Each Phase of JNNSM
Component Phase I Phase II Phase III
(2010–13) (2013–17) (2017–22)
Structures—PTC 2.00 1.60 1.20
Structures—CR 2.00 1.80 1.80
Solar Steam Generators 0.80 0.58 0.58
Mirrors-Parabolic 1.08 0.79 0.79
Mirrors-Flat 0.45 0.45 0.40
Tracking Devices—CR 2.65 2.65 1.86
Tracking Devices—PTC 0.40 0.40 0.25
HTF 0.75 0.75 0.75
Receiver Tube 1.31 1.31 0.89
Turbines 1.64 1.19 1.19
Subsequently, total market size of the above components (Table 76) is calculated using the
following expression:
Total market size for each component in eachphase of JNNSM
= (Costper MW for each component in each phase of JNNSM)
× (Planned capacity addition in MW per year in JNNSM)
Table 76:
Market Size in Rs Crores per Year in Each Phase of JNNSM
Component Phase I Phase II Phase III
(2010–13) (2013–17) (2017–22)
Structures—PTC 293 360 1056
Structures—CR 7 223 1008
Solar steam generators 133 219 934
Mirrors—parabolic 158 177 694
Mirrors—flat 2 56 224
Tracking devices—CR 9 328 1039
Tracking devices—PTC 59 90 218
HTF 110 169 660
Receiver tube 192 295 785
Turbines 273 448 1911
136 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
E. Estimation of Direct and Indirect Economic Impact
Direct and indirect economic impact was calculated for all the three possible outcome
scenarios in JNNSM. Direct economic impact was defined as the total investment each year
in CSP plants under the three different scenarios separately.
Indirect economic impact was calculated using expected localization of different component
manufacturing in all the three phases and their expected value addition to the economy as
a whole. For calculation of indirect economic impact, it was assumed that 65 percent of the
imported cost of components constitutes the total value of material and services that will in
turn be the amount of local economic activity, if produced indigenously.
Expected localization of different components for the three different phases under scenario
A, B, and C are given in Table 77.
Table 77:
Expected Indigenization of Components (Percentage) for Different Scenarios
Scenario C Scenario B Scenario A
CSP components
Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III
Solar collection
Mirrors 0 50 100 0 0 50 0 0 40
Support structures 100 100 100 100 100 100 100 100 100
Drive mechanisms 0 0 100 0 0 80 0 0 0
Foundations 100 100 100 100 100 100 100 100 100
Assembly 100 100 100 100 100 100 100 100 100
Assembly facility 100 100 100 100 100 100 100 100 100
Thermal conversion
Thermal oil
Receiver tubes 100 100 100 80
Ball joints 100 100 100 100 100 100 100 100 100
Piping, valves and
100 100 100 100 100 100 100 100 100
accessories
Oil forwarding skid
(filters, piping, pumps, 100 100 100 100 100 100 100 100 100
tanks, assembly)
Oil purification system 100 100 100 100 100 100 100 100 100
Fire protection system 100 100 100 100 100 100 100 100 100
Inertization system 100 100 100 100 100 100 100 100 100
Natural Gas Boilers 100 100 100 100 100 100 100 100 100
Thermal storage
Storage medium (molten salts)
Molten salts forwarding
100 100 100 100 100 100 100 100 100
skid (tanks, pumps, piping)
Heat exchangers 100 100 100 100 100 100 100 100 100
Initial filling system 100 100 100 100 100 100 100 100 100
Civil work 100 100 100 100 100 100 100 100 100
137 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Cont...
Scenario C Scenario B Scenario A
CSP components
Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III
Electrical conversion
Power block 100 100 100 100 100 100
Balance of plant (BOP) 100 100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100 100
Electrical system 100 100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100 100
Civil work 100 100 100 100 100 100 100 100 100
Project management and EPC
Project management 100 100 100 100 100 100 100 100 100
EPC 100 100 100 100 100 100 100 100 100
Based on above localization projection for components, direct and indirect economic impact was
worked out and presented in the Table 78:
Table 78:
Direct and Indirect Economic Impact
SCENARIO ECONOMIC PHASE I RIOGLASS SCHOTT TOTAL SCHOTT
IMPACT SOLAR INC (LOCAL IP)
Direct 1,097 2,084 8,400
A 76 13
Indirect 437 1,020 4,168
Direct 3,233 6,114 24,132
B 83 16
Indirect 1,288 2,983 12,961
Direct 5,369 10,027 49,170
C 90 20
Indirect 2,370 5,434 28,725
Local share in 2022 was calculated as a ratio of total value of local component supply to CSP
plants and total investment in CSP plants in 2022.
Overall cost reduction by 2022 was derived from the primary survey mentioned in section 1.
F. Estimation of Job Creation: Labor Impact
Estimates for jobs both during construction and during ongoing O&Mfor the reference
plant of 100 MW and 8 hours thermal storage are as follows, based on interactions with
developers on the skills, resources, and manpower required (from the primary research
detailed in section1).
Jobs during construction:
g 100 managerial staff
g 250 directly employed skilled staff
g 2000 indirectly employed unskilled contractlabor
138 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Jobs produced by ongoing O&M:
g 50 managerial staff
g 100 directly employed skilled staff
g 200 indirectly employed unskilled contract labor
Based on the above numbers, job creation per year for construction, O&Mand local
manufacturing were calculated considering all the three possible outcome scenarios (A, B
and C), as shown in the Table 79:
Table 79:
Job Creation per Year for Construction, O&M, and Local Manufacturing for the Three Possible
Scenarios
Construction Local Manufacturing Operation
Scenario Type of Job
Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III Ph. I Ph. II Ph. III
Managerial staff 33 75 400 30 67 360 17 37 200
A Skilled labor 83 187 1,000 75 169 900 33 75 400
Unskilled labor 665 1,500 8,000 600 1,350 7,200 67 150 800
Managerial staff 100 225 1,200 90 200 1,080 50 110 600
B Skilled labor 250 562 3,000 225 505 2,700 100 225 1,200
Unskilled labor 2,000 4,497 24,000 1,800 4,050 21,600 200 450 2,400
Managerial staff 167 375 2,000 150 338 1,800 83 190 1,000
C Skilled labor 417 938 5,000 375 845 4,500 165 375 2,000
Unskilled labor 3,333 7,500 40,000 3,000 6,750 36,000 333 750 4,000
Where,
Total manpower required in each phase of JNNSM (skill-wise)
= (Total manpower required for a 100MW plant)
× (Expected capacity addition in each phase of JNNSM (all three possible outcome scenarios))
139 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
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‘Development of Local Supply Chain: The Missing Link for Concentrated Solar Power
Projects in India’ study is a diagnostic of the manufacturing potential of India’s local
industries supply components and related engineering and operation and maintenance
services for Concentrated Solar Thermal Power (CSP) projects. The study looks at the
domestic manufacturing capability for CSP projects to support solar power development
in India and realized the resulting economic benefits. It also shows developing indigenous
value chains could lower the overall project costs and spur industrial growth & R&D capacity
in the long run.
This study is part of a series of publications on the topic. The earlier publication was focused on
the Middle East and North Africa (MENA) region. These studies are published to communicate
the World Bank’s views on pressing issues and stimulate policy & public discussions.
The Energy Sector Management Assistance Program (ESMAP) is a global knowledge and
technical assistance program administered by the World Bank. Its mission is to assist low-
and middle-income countries to increase know-how and institutional capacity to achieve
environmentally sustainable energy solutions for poverty reduction and economic growth.
For more information about ESMAP’s work, please visit: http://www.esmap.org.
World Bank Studies are available individually or on standing order. This World Bank Studies
series is also available online through the World Bank e-library (www.worldbank.org/elibrary).
141 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India
Notes
Notes
Notes
Cover photo credit:
Mr. John Jacob, ACME Cleantech Solutions Limited
Disclaimer:
The information and opinions presented herein, are meant only for factual purposes and do not intend to reflect the situation
or circumstance of any country or entity. While all efforts have been taken in gathering information from reliable sources,
neither ESMAP nor the World Bank should be held responsible for the accuracy of the data presented. The report has been
discussed with the Government of India, but does not necessarily bear their approval for all its contents, especially where the
World Bank has stated any judgment / opinion / policy recommendation.
146 Development of Local Supply Chain
The Missing Link for Concentrated Solar Power Projects in India